Go Fashion (India) Limited (GOCOLORS) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Go Fashion India Limited Q3 and 9 Months FY '26 Earnings Conference Call. Before we begin, I would like to remind participants that this conference call may contain forward-looking statements, which are based on the beliefs, opinions, and expectations of the company as of today. These statements are not the guarantees of the future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Saraogi, Promoter and CEO of Go Fashion India Limited. Thank you, and over to you, sir.

Good evening, and a warm welcome to everyone present on the call. I have along with me Mr. R. Mohan, our Chief Financial Officer; and SGA, our Investor Relation Advisors. I hope you have all received our investor deck by now. For those who have not, you can view it on the stock exchange and the company website. Q3 has been a challenging quarter for the apparel industry, mainly due to lower footfalls. During Q3 FY '26, revenue stood at INR 194 crores with gross margins of 64.3%. EBITDA stood at INR 52 crores and PAT stood at INR 7 crores. However, the company has demonstrated resilience in its core operational fundamentals, such as full price sales ratio, items per transaction, and customer conversion rates, which has remained stable, reflecting continued consumer relevance and disciplined execution. The overall retail environment remains subdued, with discretionary consumption witnessing moderation across categories. Factors such as uneven festive demand, selective consumer spending, and lower footfalls resulted in a slower same-store sales growth during the quarter. The softness was largely industry-wide in nature. The company continued to prioritize full price sales ratio by maintaining a sales ratio -- full price sales ratio of more than 95%. This disciplined approach helped us maintain healthy gross margins at a stable 64.3% in Q3 FY '26, which further highlights the strength of our pricing of our brand. Q3 FY '26 was deeply impacted by a slowdown in our LFS channel. One of our key LFS partners had a pause of fresh inventory intake across brands, which affected our LFS sales by 30%. We continue to engage closely with our LFS partners and expect this channel to normalize as we continue to supply inventory to them. We continue to engage with our LFS partners to ensure that these kind of interim issues what we have faced, we don't face again. To drive improved same-store sales growth, the company has undertaken focused initiatives around customer engagement and new product launches. In parallel, we had recently collaborated with a leading influencer to showcase our bottom wear collection and enhancing the brand visibility and relevance among younger audience. Such initiatives are expected to support stronger customer traction and improve store level performance over the coming quarters. Over the time, we have strengthened our position in the nonleggings category, and it has further strengthened. Today, our nonlegging bottom wear category gives us a 65% contribution in our sales, which in earlier times used to be less than 50%. Moving over to the operational metrics of Q3 FY '26. Our store expansion strategy continues to remain calibrated and selective with a clear focus on entering high-potential markets. As of 9 months of FY '26, the company has added 49 stores, and we expect to close FY '26 with a net additions of 60 to 70 stores. Our approach to network expansion remains very disciplined with emphasis on store-level profitability and strengthening brand salience. We continue to keep a close watch on inventory levels, with inventory levels being at 114 days as of December 31, 2025. Our inventory -- on the inventory front, we have seen an increase in our inventory for our new concept -- daily wear concept, which had increased our inventory marginally from the earlier times. For the full year FY '26, we anticipate inventory levels to stabilize in the range of 100 days, ensuring operational efficiency and healthy working capital management. Our strong focus on inventory and working capital efficiency will help us achieve the target of converting more than 50% of our EBITDA into pre-Ind-AS operating cash flows. On our new initiatives, including our international store in Dubai, and our daily wear concept, are demonstrating healthy unit economics in early stages, and we remain excited about their performance in the coming quarters. As of now, we have opened 6 stores for our daily wear concept, and we look to scale -- to make it about 10 stores by March 2026. In line of our commitment to shareholders, we've announced a buyback this quarter of 14,13,000 shares at a price of INR 460 per share with a total size of INR 65 crores. Way forward, smaller format stores, the small-sized stores, has been witnessing a sharp decline in performance, because today's consumer is looking to shop within a larger store experience. So in line with that, we had consolidated some of our smaller stores last year, and we will look to continue some of our remaining smaller stores in the quarters to come. The company is taking a cautious approach on new store expansion, with a clear focus on strengthening same-store sales growth. Our priority is to improve performance across the existing store network through better execution, enhance customer experience, and operational efficiencies. Our immediate objective is to move from negative same-store sales growth to flattish and then eventually taking it to low-single digit, supported by improvements in store level productivity and throughput. This will be -- this will not only be driven by external factors, but even by sharper execution at a store level, introducing new products and better engagement with our new audience. Second, our footprint expansion will be driven by careful selection of high-quality locations, through picking and choosing the right location with strong unit economics. Lastly, recognizing retail is fundamentally a balance sheet business, we remain sharply focused on cash conversion, higher inventory turnover, and disciplined capital allocation, ensuring business remains profitable and is a very RoCE-centric business. With this, I would like to hand over the call to Mr. R. Mohan for an update for Q3 and 9 months FY '26 results and financials. Thank you.

Thank you, Gautam, and good evening, everyone. First, I'll give the Q3 financial numbers. Our revenue for the quarter stood at INR 195 crores. Gross profit stood at INR 125 crores, with a gross -- GP margins of 64.3%. Our EBITDA for the quarter stood at INR 52 crores. EBITDA margins is at 26.7%. PAT for the quarter stood at INR 7 crores. PAT margin is at 3.7%. Coming to the 9 months FY '26 performance. Revenue is at INR 642 crores. Gross profit stood at INR 406 crores, GP margin at 63.2%. EBITDA is at INR 187 crores, with EBITDA margin at 29.2%. PAT stood at INR 51 crores, with a PAT margin of 8%. RoCE and RoE, excluding Ind-AS impact, as on 9 months FY '26, stood at 13.1% and 10.3%, respectively. Cash and cash equivalents stood at INR 256 crores, as on 31st December 2025. With this, now we'll open the floor for the questions and answers.

[Operator Instructions] The first question is from the line of Devanshu Bansal from Emkay Global.

Firstly, sir, I wanted to understand how should we read your SSSG performance. We were flat for a fairly long period of time, but now reporting in the negative trajectory for last 3 quarters. Though you have mentioned that from a retail parameter perspective, footfall is the only challenge. But my concern was that even footfall, we are attributing it to weak consumption, but is there a certain level of deterioration of brand strength, so that it is not attracting the relevant amount of footfall. So your color on this will be very helpful.

Yes. No, I think, see, Devanshu, from a brand perspective, I don't see that. Yes, we want to, as a brand, increase our younger audience as a customer base. But from a brand strength and relevance perspective, I think we are very much there. See, even from a product mix perspective, if you see today, 65% of our sales are coming from the other value-added products, and that's how the market -- the bottom wear market is heading in direction. So I think from a brand relevance and product relevance perspective, I don't think is an issue. I think the overall footfalls in Q3 has been very weak. See, we have done many channel checks also. And we have seen similar kind of trajectory in other places as well. So the overall macro scenario obviously has had to do a lot -- the footfalls issue has had to do a lot with our SSSG. Another thing which I mentioned in my speech, our SSSG in a very small store -- see today, what has happened because the bottom wear market has become a wider market with so many products, the very small stores from an experience perspective becomes a little bit of an issue. I mean, we have seen softer and larger degrowth in SSSG in those very small stores. So I think the larger attribute to a negative SSSG is obviously the overall macro scenario in footfalls and these small stores, which have degrown a lot more than normal because of the size.

But this footfall issue, is it also related to consumers sort of preferring to show up more online or via quick commerce channels where our presence is very limited, right? So are you also thinking on ramping up our presence in these channels because footfalls, et cetera, may remain weak, right? So if the consumer preference is shifting towards other channels, or maybe through formats where they are getting the entire wardrobe rather than preferring to go for a stand-alone bottom wear store. So how are we sort of focusing on capturing such consumption occasions?

Yes. See, in fact, yes, I mean, rightly, you said Devanshu, I think, look, online and quick commerce has always done well. And for us, because we are having a very small contribution, so that's a channel for us to build. So our online channel has seen decent traction. Our quick commerce also, we have been live on Blinkit and Zepto, and we've seen very good traction there. So I think as that channel picks up speed for the apparel category, our share also in the e-comm, space will organically grow. So from an e-com and quick commerce perspective, we are there present with our styles and inventory across all channels. I think it's just a matter of time. Once it picks up speed, it will also start reflecting in our revenue numbers.

And lastly, Gautam, a few clarifications on the LFS side. Our revenue mix has improved towards EBO, right? So it is 80% EBO this time around versus 74% last year. The gross margin for this channel is about, in my understanding, 35%, 40% better versus the LFS channel, right? But if we see from a company-wide perspective, this should have reflected in 250 bps, 300 bps better gross margin on a Y-o-Y basis, but this is flat in this quarter. So is this largely due to deterioration in gross margin profile of LFS channel as well? So what explains that? So yes.

Yes. See, we are also studying that, Devanshu, and I will come back to you on that. But at the outset, when we are looking at it right now, last year we had started EOSS a little late at the EBO level. This time we had started a little earlier where usually we start. Last year, our EOSS start date itself was late. So because the quarter 3 had a week, 10 days of more EOSS weeks, that could have had an impact on the EBO gross margins, which is not reflecting in the upside of the overall company gross margins because of low LFS. We are anyway studying this. We'll come back to you with more clarity around it. But at the outset, it looks because of the start of early EOSS, which is by a week, 10 days.

And from a model perspective, is your LFS, SOR based or then the partners can return the inventory in case they are closing the store or how is it?

Yes. So usually, it is like this, Devanshu, it is based on SOR. So what we do as per Ind-AS standard is on -- because it's on SOR, we show it as debtors in our books. We show it as sales when we dispatch the goods. So it is debtors in our books. But because it is SOR, as per Ind-AS 115, we have to put a provision for sales return based on historical trends. So whatever is the last 3 years of historical trends of return, we provided on a quarterly basis. So the provision of sales return is inbuilt for any stock which is coming back through the year.

No, that's fair. But what happens in terms of store closures, right? So we have had 100...

So yes, for example, yes, your question is right. Suppose today an LFS decides to shut 20 stores, those 20 stores stock will come returned, and it will be booked as a sale return. But what happens, such increase in returns will reflect in the next year's provisioning because you tend to usually take a 3-year average of -- for a provision of sales return perspective. But to your question, if an LFS shuts 30, 40 stores or whatever stores, the stock coming back will be shown as a sales return.

[Operator Instructions] The next question is from the line of Gaurav Jogani from JM Financial.

My first question is again with regards to the LFS channel only. This quarter we have seen 137-odd LFS getting shut Q-o-Q. So one, what is -- was there anything specific this quarter that we saw such large closures? And how do we look for expansion in LFS going ahead?

Yes. So see, Gaurav, the stores are largely one of our key LFS partners. They have changed the format of that store, and they have changed it -- they rebranded and changed the format of the store. So when that happened, all the external brands had to move out of that -- of those particular stores, including us. So the reason we have exited the store is because that key partner had decided to change the format and rebrand it. Now moving forward, LFS expansion from a store addition perspective, whenever we do get an opportunity for adding new stores, we will selectively choose which location makes sense and then we will select. Like in Pantaloons, we have been expanding and adding stores over the last few quarters. Even in Reliance, we are getting new stores. So selectively, on the basis of what is being proposed to us, we will select those locations and move forward. As far as quarter 3 is concerned, our quarter 3 revenues were deeply impacted because for one of our key LFS partners, we were not able to dispatch stock for about close to 45 days. They were not taking inventory across brands for a period of 45 days, and because of that, we were not able to dispatch stock. And that is why we've lost 45 days of dispatches, which has resulted in 30% drop in sales. And that's why our Q3 numbers -- overall numbers have got deeply impacted because of this dispatch issue, which happened in November and a little bit of December as well.

So Gautam, can we expect this to -- sales to come back in Q4 in some sense because...

See, not really because, see, what happened, that 1.5 months which we have lost, you're -- see, what happens, how do we replenish stock at an LFS store, right? We keep a base stock. We decide a maximum stock level. Now based on the maximum stock level and the closing stock at an LFS store, you're basically only sending the difference. At the -- so in January or February, it's not that you're going to be sending additional stock. You're going to be sending stock only to the extent of the maximum stock level. So the 45 days what we have missed out, that increase in number we will not see in January and February.

But if that 45 days we have missed out, they would have again sold...

Yes, I understand. But ours is -- see Gaurav ours is a replenishment business. The sales will happen, you keep replenishing. Your sales will happen, you keep replenishing that store, right? But your maximum base stock is only to a certain level. So if you have not replenished 45 days, you have, to a large extent, lost out on a lot of secondary sales. Now we will not be able to recover those secondary sales in the coming months. So technically, you're sending only that much stock which is there in the base stock.

And Gautam, just completing on that LFS opening part. So how many LFS now we can model-in to open at least for Q4 and the rest of the couple of years going ahead?

See, it's difficult to say. It's difficult to give a guidance on how many LFS stores we will be opening next year. It all depends on how our partners expand. And in that proposal of expansion, what we think would be relevant. So it's going to be very subjective to what is being proposed to us. See, sometimes a partner can decide to add 70 stores, 80 stores, but certain key markets, you wouldn't want to be part of that market. So it's very subjective to what is being proposed to us. So I think that we will be able to only know next year as we are proposed with the list of stores.

And Gautam, coming back to the EBOs, are you seeing any recovery in the momentum of any sorts in the month passed by in January to indicate that from a negative 4.5% SSSG that you had witnessed in Q3, probably you will go flattish or that sorts? Or it continues to remain weak as it was...

See, Gaurav, I think -- see, we are seeing 2 trends, Gaurav. I think what is happening is our midsized stores, our stores which are slightly higher than 500 square feet, 600 square feet. See, because our product range has increased, right? 65% of our sales are coming from the nonleggings category, the value-added categories. So today, the consumer wants display and experience of shopping when you are seeing so many products. So we are seeing 2 trends, right? The smaller stores, the very small stores are obviously seeing a decline because we are not able to display all the new products. The slightly larger stores, which are the 600-square feet, 700 square feet stores, they are seeing good increase. Some of the stores are actually showing very good positive SSSG as well. So I think over a period of time, as our small stores phase out of the system and the newer stores what we cautiously add becomes of a relevant size, you will also see improvement in SSG from that perspective. But largely, the improvement of SSG is going to be obviously relating to footfalls. So I think both these things hand-in-hand will play a very important role in the recovery of the SSSG from being negative to a mid-single-digit positive.

But Gautam, in this scenario that you know the expectation, then there could be a possible drag on the margins because your cost will keep on escalating at a certain pace. So would it be fair to assume that at least over the next 3, 4 quarters, you might see a decline in the EBITDA margin just because of the negative leverage?

See, I'll tell you what we are planning to do as a company, right? Right now, we are being very careful with expansion. So right now, we are prioritized and thinking, how do we get the SSSG back to positive. Today, we are at minus 5%. Our aim is to get to mid-single digit to 5%, right? So from minus 5%, we have to take it to plus 5%. So all our efforts right now as a company is to see how we can fix this and get this into positive. Of course, the overall footfalls is going to make a very big contribution to this. But we are also going to be putting in smaller efforts at new products, opening better-looking stores to fuel that. So our first priority over the next 1 year is to definitely put entire focus on improving SSSG and maintaining margins. So on the expansion front, we are going to be very selective in our expansion in the coming quarters, so that because of expansion, there should not be an EBITDA hit in the P&L. Basically what happens, Gaurav, when we are seeing new stores, immature stores which are not matured, they are a load on the P&L because you're paying the full rent and salaries without the store being matured. So we are taking one step back and saying, look, hey, we will be very careful in our expansion, not go overboard with the expansion so that margins don't get compromised during this recovery period.

So then can we expect the store opening to even come down next year in the EBO format versus the 60, 70 that we are expecting this year?

See, honestly, Gaurav, we are not guiding -- we are not giving -- unlike earlier times, right? Earlier times, we used to be very clear with our guidance on how many store openings. This time, we have seen that our margins, because of flattish -- because of negative SSSG, our margins have taken a hit. And as a management, we have taken a conscious call to slow down the store expansion and do it selectively. See, that does not mean that we will not expand. See, wherever we are getting a very good opportunity, and where we should feel that we should be there, we will also expand. But we are not setting ourselves a target. We -- during this recovery period of taking SSSG from minus 5% to plus 5%, we don't want to compromise on the health of the P&L.

The next question is from the line of Ankit Kedia from PhillipCapital.

Gautam, just continuing from the previous question, is it fair to assume next year's store opening could be around sub-50 stores or even lower than that because this year, with 60, 70 stores also your margins have been hit. And next year also, the recovery is question mark. So definitely the stores opening would be below 50?

So Ankit, I know where you're coming from. And honestly, it's very difficult for me to give a guidance right now. It all depends on when does the SSSG pick up speed, right? And suppose if things go well, and next year by -- I'm just giving you a hypothetical example, by next year, middle or maybe the second quarter, we come back to positive SSSG, then maybe we also start increasing our footprint as well. So it all depends on the recovery of the SSSG. So it's very difficult to give a number for next year, whether it will be below 50 or above 50, it's very difficult to predict. But as management, we feel that we will not go to an extreme of not opening also. Like for example, if we get a good mall which is coming up in Mumbai or Bangalore or any other city where it's a prospective mall or very prospective high street, we will definitely go and open there. But we will not go overboard and try to open everywhere also at the same time. So we'll keep a good blend.

So given that it takes 3 months to 6 months to open a store and today with you at minus 5%, 6% like-for-like growth, next 6 months store opening will be muted. At least that we can assume?

Yes, it will be muted. So it's difficult to give a number, but I can tell you it will be muted for sure, because we are going to be very cautious in our approach.

Sure. Second is on the LFS...

Also -- sorry Ankit, just extending, see, we'll also be doing a lot of relocation, Ankit. So what will happen sometimes? Like I explained to you, we have sometimes very small stores which are not doing well. Today, the consumer wants a slightly better experience. So in the same market, we might shut the older store and open a new store. So there might be some relocations which will have a positive impact on the revenue number as well.

Gautam, we would appreciate if you can share the area of the stores today. At a 800-, 900-store network, we don't know what is the area. Given that bulk of the store closures of smaller stores are behind us and now you're opening 600, 700...

Yes. So what I'll do, Ankit, in the next -- probably after this earnings call, once we have calibrated the entire data, we will share the data with everyone, how many stores are there which are the smaller stores, so everyone has clarity on that.

And how many more store closures are remaining for the smaller stores? And can you just share the decline you have seen in the smaller stores?

Yes, we will share. First, we are calibrating the data. So once we have calibrated the data, we will be happy to share.

Okay. No, because on the previous question, you said that the smaller stores are significantly negative. SSSG are declining. So at least some data you would have to pass that comment, right?

See, we've seen. No, I'll tell you. Like, for example, where our company average level is minus 5%, the smaller stores, we have seen a slightly higher degrowth of more than 9%, 10% SSSG. And sometimes numbers are not fully reflective. Even when we are visiting stores and when we are interacting with our consumers, the consumer feels that, okay, in a slightly larger store of 600 -- 500, 600 square feet, the newer bottoms -- the newer styles are better on display. So it becomes easier to shop. In a very compact store of 200 square feet, it becomes very difficult to display all the items to the consumer. So from an experience perspective also, it hampers.

No, I agree. Because your core moat was a smaller store, high-throughput, high-margin business. Now that is getting disrupted because your average store size is becoming 600 -- at least incremental store size...

No, no, see, Ankit, the unit economics of a 600 square feet store and a 300 square feet store is not different. Even a 600 square feet store from a unit economic perspective comes under the same category as well. So it's not that my EBO unit economics will go down because I'm opening 500-, 600 square feet store. See, if today, I had gone and opened, say, 2,000-, 3,000 square feet stores, that's a completely different unit economics. But stores which are sub-1,000 square feet have similar unit economics for a 200 square feet also and for a 550-, 600 also.

Gautam, at least last 3 years since we started opening bigger stores, sales per square feet has declined, if you see. Now that could be due to market environment or it could be due to loss of market share or could be due to loss of footfalls. It could be either of it. But at least on the face of it, we have seen a decline in sales per square feet.

So yes, so your question is right, Ankit. So the sales per square feet would be more because of the footfalls in the overall macro scenario. It is not because we have gone into a larger store and the unit economics are not as good as a smaller store. It's not because of that.

Sure. My second question is on LFS. You made a comment that one of our large retailer is switching the stores, which had third-party brands, to a private label brand. Now do we have visibility that next year that won't happen from the retailer, or it's going to continue, and we have been said that a few hundred more stores could be closed in the medium term?

See, we are also trying to get that clarity, Ankit. But honestly, if you ask me the truth, I don't know. Can it happen next year? Maybe, yes. So we are also speaking to our partner and trying to get that clarity, so that we are also prepared on if there are going to be such format changes at their end, we will know about it. So we are trying to find out. The minute I have some clarity on that, maybe in the next earnings call or maybe in between that, I'll definitely guide everyone on that.

Sure. And on the inventory part, our gross margins have expanded, but with the change in format and other things, how are the commodity prices placed today? And with the GST pricing being more favorable, at least for higher price points above INR 1,000 products, going forward, do you feel the need to reduce the discounting which you are giving to the consumer? Or the new labels have come up, how will that pricing change and how are the commodity prices?

Honestly, Ankit, for the -- you're talking about the GST reduction, right? Those products you're talking about, right?

Yes.

So we were giving the benefit to the consumer. We have not changed our MRP for such products. So we are continuing to give the benefit to the consumer. There might be a time where we feel instead of taking a price hike for those products, we will just remove the discount what we were giving for the GST benefit. So in short, we have not taken the price hike, but we'll get the benefit of that eventually. But when we are going to start doing it, we are deciding it internally once. So to answer your question, we are not changing the MRP of those products where the GST was reduced. Wherever the GST was reduced, we were passing on to the consumer. Eventually, instead of taking a price hike of those products, which were [ new ], we would just remove that benefit without taking a price hike.

And in the other products, sub INR 1,000 where the discount was not available, 5% remains 5%, there are you considering taking a price increase?

No, not right now. See, Ankit, we are in a volume-led business, right? So our entire company's focus is to drive volumes. I have reviewed the products under INR 1,000. We have made very small correction in certain products where we have increased the pricing because it was underpriced to begin with. But those are very, very few products. Largely, we have not touched anything under INR 1,000 because we feel we are well priced.

Last question is on the A&P spend. Do you think, at this point of time, you need to be aggressive in A&P? Because previously, you always said when demand is not there, you don't want to spend because as it is demand is not there, consumer is not going to walk in. But has that mind shifted that, you have to go aggressive at this point of time?

See, I think, no, I don't think we have to spend more, honestly. So I think that logic of 2% of revenue still holds good. This time, it shows a little more because our revenue this year has stayed flat, but we had marketing budgets allocated for a growth revenue, right? So that's why as a percentage of revenue is slightly still higher. But from how much we want to spend, I don't think that number will increase. We are just transitioning our digital marketing to a very different methodology where we are reaching out to the younger audience and the millennial audience by different, different type of personalized marketing. See, our marketing team, to begin with, was a very old school, orthodox type of marketing, has now changed. Over a period of time, it started pivoting towards more and more digital. So I think the way of marketing is going to evolve. But from a spend perspective, I don't see our spend increasing. We used to spend 2%, 2.5% or 2% to 2.2%, we are going to be around that number. So as a quantum of spend, it's not going to increase.

Sure. And can I ask another question since I've taken a lot of time?

Yes, please go ahead.

It's on top wear. Given that bottom wear is under pressure, which is the core bread and butter, do you think it's prudent now for you to continue to expand top wear aggressively or concentrate more on bottom wear?

No, no. See, I'll tell you. The top wear project what we have done, the everyday concept, that's just a pilot. And I cannot -- see the pilot needs its time, right? So now we've opened 6 stores. So that will take its own journey. And that decision-making in that pilot is independent of bottom wear. So we are not going to speed up that in any way to show growth. So that pilot will go in its own speed. It's going to take some time, and it's for the future. As far as bottom wear is concerned, see, we are very, very bullish on the category. Yes, this has been a time -- this has been a very tough time for the category and the brand where we've seen headwinds and it's not reflecting in numbers. But our conviction in bottom wear is very much there. Even our recent Technopak study also emphasizes that how large that category is. So even from a short-term, midterm, and long-term perspective, our entire energy and strategy for bottom wear is very much intact. So over the next couple of years, Ankit, if you have to show growth and the numbers are to come, it has to come from bottom wear. We cannot expect the pilot to take care of the gap of growth. The pilot is there, and it will take the pilot its own sweet time. We cannot rush the pilot. Otherwise, we'll make -- we won't do justice to that project as well. Bottom wear is our main business, and we'll fix it and we'll bring it to growth. We are very bullish.

[Operator Instructions] The next question is from the line of Vaishnavi Mandhaniya from Anand Rathi.

I just wanted to understand that how much of this SSSG decline can be attributed to the entire store size issue that we faced because you said that the smaller stores saw a relatively negative SSSG or rather the larger stores saw better SSSG performance versus the footfall in general being weaker?

See, I would -- see, it's very difficult to quantify it. I would say largely this SSSG is negative because of the slowness in footfall and the overall weak environment. It's very difficult to quantify, but I would put it more towards the overall macro scenario.

So what I'm trying to get to is that, let's say, in H2, right, where we, I think, almost shut almost 40 to 50 -- H2 FY '25, we shut, I think, almost 40 to 50 of the smaller store formats. We gave us -- we said that the store closures are almost done. But again, now in this quarter, we're coming up and we're saying that we're still seeing the performance of the smaller stores not being up to the mark, which is why we're shutting them again. So I'm just trying to understand where are we coming in this entire small store, large store, medium store? And how should we look at this in terms of our performance as well?

See, the stores what we shut last year, yes, we did shut those stores, and we have seen that when we shut those smaller stores, the revenue moved to the nearby larger stores. So we saw that. It didn't have a very big impact on SSSG because 40 stores as a base on such a large number of stores will not move the SSSG needle so much. Now as far as how many stores we are going to be shutting, we are calibrating the data of the smaller stores because we can't just shut those stores just like that. We'll have to also see when are the lease renewals coming up. So as we get more clarity on that, we'll definitely guide the market on how many such stores in the smaller bucket is there. And how many of the smaller stores we'll be shutting in the short term, we will also guide that once we have calibrated the entire data, so from your end, you will also have clarity on what's happening.

All right. And one more thing, if we can also get some more inputs in terms of how does the unit economics, et cetera, move for the slightly larger stores, like what the earlier participant was also suggesting because when...

Very similar, Vaishnavi, and I'll tell you why. See, you understand -- see, I'll tell you why a 500-, 600 is very similar to a 200-, 300 and I'll tell you why. When we sign a store, we sign on a rent-to-revenue ratio. So if the rent-to-revenue ratio is in our budget, whether it's a 600 square feet store or whether it's a 200 square feet store, your EBITDA prior to staff expenses will be the same. Now coming to staff expenses, because that is the real difference between a 600 square feet store and a 200 square feet store. In a 600 and a 200, the number of people you employ for managing the store are the same. Your operating expenses also are pretty much the same. So a 600 square feet store from a unit economics delivers the same unit economics what a 200 will deliver. The difference -- always what happens is when you go past 1,000 square feet, suppose you open up 1,500 square feet, the unit economics dramatically changes because the electricity cost dramatically goes up, the number of people you're going to be keeping in the store dramatically goes up. Then you'll have to keep separate housekeeping staff. The entire mathematics on employee cost dramatically changes when it crosses to 1,200 square feet, 1,300 square feet. Sub-1,000 square feet, you're keeping the same number of people what you're keeping in a 200, 300 square feet. So the difference is really those other operating expenses and with the staff cost is the highest.

Okay, understood. Also, one last question. In terms of the newer stores that we're opening, which are slightly larger in the size, are they in the -- again, in the nearby vicinity of the smaller stores? Or are we targeting different clusters or in the same cluster, what is the strategy there?

No, no. See, one more thing is, see, definitely, during these times when SSSG is off, we are ensuring that we are not giving any room for cannibalization. So now when we are opening stores, we are very careful that it's in -- we are trying to open in different clusters where even the smallest remote chance of cannibalization should not happen. And that is why we are extremely selective and cautious in our approach of store opening.