Vishal Mega Mart needs a strong Q3 recovery after a worn-out Q2

In the earnings call, management noted that an 18-day shift in the festive calendar pushed some sales into the ongoing December quarter, which should bolster Q3 performance. The company maintains an SSSG target of over 10% for FY27, up from 7.7% in the first half. The company added 26 large format stores in Q2, primarily in south India, in line with its target of opening over 100 stores in FY27. Total store count is now 844 across 582 cities.

Management estimates the retailer has room to expand its network to about 3,000 stores. During the second quarter, Vishal Mega Mart also piloted 'Belong & Co.', a premium clothing-focused format targeting young, affluent urban shoppers. Management noted an encouraging initial response, with more than 50% of store footfalls converting into purchases, as well as repeat visits. The company plans to open a few more pilot stores this year, before deciding on the wider expansion plan for this format.

Meanwhile, gross margin contracted 32 basis points (bps) year-on-year, pinched by inflation and a lower share of high-margin apparel sales. To manage these pressures, the company froze prices in its entry-level segment, undertook selective hikes on mid-priced merchandise, and implemented the largest increases at higher price points. These segments account for about 20%, 55%, and 25% of revenue, respectively.

Management indicated that further price hikes may not be necessary at this stage. The stock has dropped roughly 34% so far in 2026, weighed down by a private equity stake sale in February. The PE firms, which are currently the company’s promoters, retain a 40% stake, fueling investor concerns over further divestments and an ultimate exit. “Concerns over potential promoter stake sales and long-term promoter ownership (after the PE firms’ stake sale), remain key overhangs for the stock,” noted Motilal Oswal Financial Services.

With the stock trading around 42 times estimated FY27 earnings according to Bloomberg data, Vishal Mega Mart will need stronger sales growth and margin recovery to justify its valuation.