A report notes that deeper private label penetration is driving assortment depth and aggressive network expansion is supporting the growth
Led by rising aspirations in tier 2,3,4 cities and an accelerating shift from unorganised to organised channels, value fashion continues to outperform the premium and branded apparel retailers, as per a report.
The report by Motilal Oswal Financial Services noted that deeper private label penetration is driving assortment depth and aggressive network expansion is supporting the growth. “We remain bullish on the growth prospects of value fashion retailers, driven by the massive opportunity from the unorganised-to-organised shift and rising preference for shopping from one-stop family shops in tier 2 and beyond cities,” the report mentioned.
Profitability improved significantly with around 54 per cent YoY growth in aggregate pre-IND AS Ebitda, driven by operating leverage benefits, despite a moderation in gross margin. The report pointed out that channel checks indicate that demand momentum remained intact in the first half of Q1FY27. However, Adhikmaas (from mid-May) and the lack of wedding days have led to slight moderation in demand.
Input cost inflation, minimum wage hikes and potential subdued monsoon remain the key near-term monitorables. The report highlighted that V-Mart (185 basis points) and V2 (155 bps) witnessed strong margin expansion. Vishal Mega Mart (VMM) also continued to witness healthy margin expansion (75 bps YoY).
“VMM remained the strongest cash generator, VMart delivered the sharpest improvement, while V2 prioritised aggressive expansion. Recent capital raises at V2 and Bazaar Style Retail (BSR) provide adequate funding visibility for the continuation of aggressive store additions in FY27.
The report mentioned that store expansion remained a key growth driver in FY26, with the four listed value fashion retailers adding around 360 net stores, taking the aggregate network to around 1,960 stores.
“FY27 expansion plans remain robust, with all four retailers targeting another year of healthy area growth, supported by strong balance sheets, internal accruals and confidence in long-term consumption trends,” the report added.
