Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aditya Birla Fashion and Retail Ltd (BOM:535755, Financial) achieved a revenue of INR3,428 crore in Q1 FY25, reflecting a growth of 7% over last year.
- The company's consolidated EBITDA increased by 15% year-on-year to INR406 crore, with an 11.8% margin.
- Both Lifestyle and Pantaloons businesses witnessed margin expansion due to gross margin improvement and effective cost control measures.
- The ethnic and digital-first portfolio more than doubled their revenues, driven by both organic and inorganic growth.
- Pantaloons' EBITDA margin expanded by 470 basis points to 17.6%, driven by markdown management and cost control measures.
Negative Points
- The overall consumption environment remained weak, particularly impacting the apparel market due to a subdued wedding season and prolonged heat wave.
- The company's consolidated PAT was negative INR215 crore, mainly due to continued investment in TMRW and ethnic businesses.
- The innerwear and athleisure segment showed varied performance, with athleisure still degrowing despite some signs of recovery.
- TCNS revenue stood at 84% of last year, mainly due to network rationalization and ongoing transformation programs.
- The company reported increased consolidated losses on a quarter-on-quarter basis, primarily due to the addition of TCNS and increased losses in TMRW.
Q & A Highlights
Q: Can you provide the ballpark SSG for Lifestyle brands this quarter and the impact of the wedding season on revenue?
A: (Vishak Kumar, CEO, Lifestyle Business) The SSG was low-single-digit negative, primarily impacted by fewer wedding days. Categories like suits and blazers, which are more wedding-centric, were affected more. Overall, the consumption occasions reduced, and the calendar is strongly loaded towards the second half of the year.
Q: Despite reducing discounting, Pantaloons managed positive like-for-like growth. What initiatives drove this performance?
A: (Sangeeta Pendurkar, CEO, Pantaloons) The growth was driven by staying the course on our strategy, which includes premiumization, improving product design aesthetics, better planning processes, and strong in-store execution. These efforts resulted in reduced markdowns and improved sell-throughs.
Q: What factors contributed to the sharp improvement in Pantaloons' margins despite modest SSSG?
A: (Ashish Dikshit, Managing Director) The primary drivers were superior execution on merchandising, better quality products, improved intake margins, and superior inventory management leading to lower markdowns. The increase in private label share also contributed significantly.
Q: Can you explain the increase in consolidated losses on a quarter-on-quarter basis?
A: (Ashish Dikshit, Managing Director) The increase in losses is primarily due to the addition of TCNS, which was not part of the company in Q1 last year. TCNS has shown some improvement, but the deep corrections are mostly behind us. TMRW also saw slightly increased losses this quarter.
Q: What are your thoughts on demand trends in the ongoing quarter and the outlook for H2?
A: (Ashish Dikshit, Managing Director) While Q2 has some factors of improvement over Q1, most of the momentum shift will happen towards the second half of the year. The general optimism is that H2 will be a good period, especially with the upcoming wedding and festive seasons.
Q: How do you plan to address the negative brand publicity around Tasva for the Olympic dress?
A: (Ashish Dikshit, Managing Director) The design was created by Tasva's design team in collaboration with the Indian Olympic Association, keeping in mind the occasion and the athletes' comfort. We have issued a response to the press and will stay with that.
Q: What is the outlook for store additions in Pantaloons for FY25?
A: (Sangeeta Pendurkar, CEO, Pantaloons) We plan to open around 25 stores this year. The first quarter saw minimal additions, but the expansion plan is back-ended, with more stores expected to open in Q3 and Q4.
Q: What measures are being taken to improve store productivity in Pantaloons?
A: (Sangeeta Pendurkar, CEO, Pantaloons) We are focusing on improving product design aesthetics, enhancing store look, better planning processes, and increasing private label share. These actions are aimed at improving overall store productivity.
Q: What is the growth outlook for Reebok in the next two to three years?
A: (Vishak Kumar, CEO, Lifestyle Business) Reebok has significant growth potential, with opportunities for retail expansion, partnered multi-brand expansion, and e-commerce growth. We aim to catch up with other brands in the segment, which are currently much larger.
Q: How should we assess the performance of TMRW, given its inorganic growth mode?
A: (Ashish Dikshit, Managing Director) TMRW has a portfolio of seven brands, with a focus on improving both revenue growth and profitability. We aim to build a business with a revenue run rate closer to INR800 crores in NSV terms. We will report quarter-on-quarter performance and may establish common metrics to reflect the health of the business by the end of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
