SPENCERS - Spencer's Retail Limited Share Price

Management outlined a positive outlook driven by operational efficiency and strategic initiatives. Spencer's Retail achieved its first positive operational EBITDA pre-Ind AS in 22 quarters (INR 0.18 crores), ahead of guidance, signaling a turnaround. Gross margins hit a record 19.7% in Q3, up from 18.9% YoY, supported by cost optimization (INR 32 crore YoY savings in operating expenses) and improved sales per square foot (INR 1,875 vs. INR 1,550 YoY). The company exited unprofitable regions (NCR, South), focusing on core markets (East, UP), and plans calibrated store additions (8"“10 stores over 12 months).

A key growth driver is the JIFFY quick-commerce platform (30-minute delivery), launched in Kolkata, with plans to expand to Lucknow and Varanasi. JIFFY leverages existing stores as fulfillment centers and a self-managed delivery fleet, targeting INR 365 crore annual run-rate.

For Nature's Basket (2% YoY sales growth in Q3), management aims to revive performance through a revamped app, loyalty programs, and omnichannel integration. Two new stores (Bengaluru, Ahmedabad) are profitable, but same-store sales growth remains a priority.

Debt reduction continues (INR 883 crore net debt in Q3, down INR 13 crore QoQ), with future fundraising contingent on sustaining profitability.

Major Points:

• Margin Expansion: 19.7% gross margin driven by product mix, supply chain efficiency.
• Cost Control: Store/support costs reduced sharply post-regional exits.
• Omnichannel Push: JIFFY targets quick-commerce dominance in core markets.
• Prudent Expansion: Focus on high-potential regions, avoiding overextension.
• Nature's Basket Revival: New stores, loyalty programs, and tech upgrades to drive growth.
• Debt Management: Prioritizing operational cash flow and strategic capital allocation.

Management aims to sustain EBITDA positivity, leveraging efficiency gains and JIFFY's scalability, while cautiously expanding in profitable regions.

Question 1:
Parikshit Gupta (Fair Value Capital): "I have a few quick questions. First would be on Nature's Basket. I just want one clarity first, please. You mentioned that there are two new stores that have been opened, one in Ahmedabad and one in Bangalore. However, the presentation mentions that from Q2 to Q3, the store count has increased from 33 to 34. So have you also closed 1 store as well. Understood. So basically, the Nature's Basket's top line growth has been a little lower. However, the premium segments in the consumer markets have been doing comparatively well. Do you attribute this low growth to the store closure? Or is it something else? Just one more question on Spencer's. In the last call, you mentioned that there were a couple of new stores in pipeline. I think Bhubaneshwar was one of the locations. Can you help us with an update on any progress on that end?"

Answer Summary:
One Nature's Basket store in Malad (Mumbai) was closed, offsetting new openings in Ahmedabad and Bangalore. Low growth was attributed to muted festive demand, not store count changes. Spencer's store expansion is calibrated; only one new store (Narendrapur, Kolkata) and a relocation in Lucknow are planned. Growth focus remains on optimizing existing regions and e-commerce over aggressive store additions.

Question 2:
Varun Singh (Alfa Accurate Advisors): "So, my first question is, please, pardon my ignorance sir, I'm tracking this company after a long time. So, if you would have already highlighted, I mean, please bear with my questions. I just wanted to know that which are the geographies that we exited? And what are the key lessons that we have learned from that? Fair point. Understood, sir. And second question, I wanted to understand that what is the ultimate change in our overall strategy from the lessons that we have learned from the geographies where there was strong competition from maybe DMart, city retailers and other quick commerce players. Sir, just one last question, if I may. What is the revenue contribution for us from liquor, meats and fresh, if you can call out that number, sir. That's it from my side."

Answer Summary:
Exited NCR and South India (Hyderabad/Telangana) due to high losses and competition. Lessons: Focus on core regions (East, UP) with competitive strength, prioritize omnichannel growth (e.g., JIFFY quick commerce), and avoid unviable expansion. Liquor and fresh contribute ~25% of Spencer's standalone revenue.

Question 3:
Akhil Parekh (Batlivala & Karani Securities India): "Congratulations to management for improvement in the operational metrics. Sir, my first question is, are you completely done now with the store closure. I think Spencer's was 90 stores is what give and take we have, and we are saying last few -- we'll add 2 to 5 stores over the next 12 months basically. So maybe give and take 100 stores we'll have probably 1 year down the line. Is it fair to assume? Sure. And then it implies that a larger part of the growth that has to come from the improvement in the sales per square feet, where we have seen improvement, where we have, as you alluded, have already reached around INR18,000 at Spencer's. Is there further scope of improvement? And on the operating costs? We have INR20 crores plus in employee cost per quarter and other expenses roughly around INR50 crores per quarter. So, is there a scope for improvement from here on? Or is it's fairly sustainable down the line?"

Answer Summary:
Store closures are complete. Growth will focus on sales per square foot (current: ~Rs.1,800/month; scope to reach ~Rs.2,000) and e-commerce, not store additions (8"“10 stores max in 12 months). Operating costs are optimized; future EBITDA will hinge on scaling revenue with stable costs.

Question 4:
Ravi Jobanputra (Nuvama): "I just wanted to ask you, is there a difference in the way we are building our merchandise mix, given we are having a better view of a more omnichannel and consumer today? And is there a category that we need to rationalize brands that we stock on other categories where we need to add brands? Any view on this?"

Answer Summary:
Merchandise mix remains consistent across online/offline, but online emphasizes top-up missions (smaller packs, faster delivery). Assortment width (15,000 SKUs) is a USP; app features (e.g., search optimization) enhance discovery. No pricing differentiation between channels.

Question 5:
Naitik (NV Alpha Fund): "My first question is regarding our current debt position, if you could share the number with us? Meanwhile, my second question is on Nature's Basket. So, what level of revenue per square feet do you think would be breakeven on EBITDA level for Nature's Basket? Also, one more question I had is, I joined a little late, if you could share your strategy on the online or omnichannel business, that would be really helpful?"

Answer Summary:
Net debt: Rs.883 crore (down Rs.13 crore QoQ). Nature's Basket needs Rs.3,300"“3,400/sq.ft/month for EBITDA breakeven. Online strategy (JIFFY) targets existing offline customers for 30-minute delivery, avoiding costly customer acquisition.

Question 6:
Rishikesh (Robo Capital): "Sir, what was Spencer's Retail stores after we have closed down approximately 30 or 40 stores? Our sales per square feet looks to have gone up. If I just try to back calculate it looks around INR5,500 for Q3, which was lower last few quarters. Do you think this number is sustainable or there is more headroom for this number to go up? Also, my second question is with respect to the debt. Are you looking to pay off some debt and maybe by doing a fund raise? I believe last year we have approved a fundraise also?"

Answer Summary:
Spencer's sales/sq.ft rose to Rs.1,800/month post closures (vs. Rs.1,550 last year). Further upside possible (industry benchmarks: ~Rs.2,500). Debt reduction/fundraising plans depend on sustaining operational breakeven first.

Question 7:
Parikshit Gupta (Fair Value Capital): "In terms of Spencer's, can you share a little bit of information about the average bill value or the number of bills, even directionally, which one of them was lower that resulted to a lower year-on-year sales number? I mean like-to-like? I understand. So, in terms of deliveries, you mentioned that you are going to rely on your own fleet, which is of the size of 100-odd people currently. But as you grow the JIFFY proposition, don't you think having a third-party logistics provider would be better given the challenges of sustaining the operating EBITDA and the uncertain margins outlook?"

Answer Summary:
Spencer's offline average bill value (Rs.1,500) remained stable, but online growth (40% YoY, Rs.900"“950 ABV) diluted blended ABV. Self-managed fleet ensures reliability for 30-minute delivery; third-party riders risk delays during peak demand.