Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Premium segments like Red Label and Comfort Power have grown significantly ahead of overall growth.
- Sneaker studios have expanded to almost 700 stores, driving sneaker growth.
- E-commerce business continues to grow robustly, contributing to both revenue and profitability.
- Successful automation of the second largest warehouse in Mumbai and monetization of Faridabad land.
- ERP implementation has gone live smoothly, expected to improve speed, agility, and accuracy in business decisions.
Negative Points
- Retail expansion fell short of expectations, with only 24 new doors added against a target of 40 per quarter.
- Distribution business remains a drag on overall growth, particularly in the mass market segment.
- Marketing expenses have been higher, impacting profitability.
- Overall growth rates were lower than expected at 2.4%, reflecting sluggish trading conditions.
- Fixed costs remain a concern, with desired leverage not achieved from a top-line perspective.
Q & A Highlights
Q: Gunjan, your TV interview in the morning, you talked about a demand pickup in March and is that demand pickup sustaining into April and May?
A: Yes. So I can't give you a forward-looking forecast Girish and obviously very soon will come back to you for the next quarter. But the pieces that, yes, we did see an improvement during the quarter from Jan, which was actually much worse, but to March, which was a little better, but still not giving us complete clarity in terms of how the underlying conditions have changed. As I mentioned, there are some signs and pockets that we see, but is it lifting the entire Board. We will have to see how it comes over a longer period of time. So that will element of comment of mine right now.
Q: My second question is on the channel mix and channel growth in FY24. Now that the full year is done, which have been the channels which have been driving growth for you in FY24 and which has been the drag. And I would want to specifically comment on the COCO channel, how has the growth been there?
A: Right. So broadly, the growth engines that have delivered in terms of growth would be the ones that is of a franchise, the I would say, e-commerce and Hush Puppies from a channel mix perspective, right. The ones that are playing in the lower end of price point the biggest drag. So COCO would have been just about at par for the overall. It is the distribution business and the lower end price point related to our business that has been the drag on the growth.
Q: What is driving the variability in gross margins across quarters and is the 60% gross margin sustainable going into the future?
A: Actually, I would say reasonably predictable seasonality. Obviously, there are some variables that do come into get accentuated depending on one is the circumstances of the business as well as more importantly, festival moving from one quarter to another. But broadly, there are two large things that create a mix change. One is EOS's, which comes into basically, let's say, the June quarter as well as the December quarter. The second one that there is basically a certain mix of a certain kind of business. So let's say, if you know, the speakers goes up, that goes with slightly higher margins from a corporate perspective. But you will also have times when the school business goes up and that time the margins to come down, but they do follow a reasonably predictable pattern if you look at it over longer periods of time, and that should not deviate much. The only large deviation that we can possibly have is festival season moving from one quarter to another.
Q: What is the mix of the discounted or full price sales within the revenue? And also, you've been taking a lot of initiatives on improving the frequency of new launches and even overall better inventory management. So as a result, to what extent can this benefit in terms of increasing the full price sales?
A: Yes. So there are slightly different objectives Videesha for this question. So the newness is towards driving freshness. People want to see range and fashion in the store and the consumers come to us at a frequency of about three to five months, right on an average. And therefore, they would like to see new styles and new varieties and wherever applicable, new technologies, et cetera, coming through and that's what the concerted drive was. I think over the last two years, we would have made significant improvement on it. The initiative that we have been driving for the last two quarters and which is what I tried to give some snapshot and a presentation was to make sure that it percolates across the entire network and earlier, a lot of that is to be concentrated in the top 500 stores. We wanted to make sure even the bottom 800 also get equally impacted. And that's where basically the minimum threshold that I said, which was at least 20% by store, by category should be a decidedly a fresh for the season. The second thing that you mentioned was that how does that help in terms of? -- So that's the prime driver. Does that help full-price sales? For sure, it does. But a large part of this unit does not necessarily drive volumes. The volumes are driven by the ones that the consumers are repeatedly consuming and some of it is best sellers and news. So bestsellers and news, which are carryovers from previous season that have done well will be large contributors to volumes and therefore, the sales mix comes from those. The last piece on a markdown of the portfolio in the range of ballpark. As I said, it varies in the previous question and answer. It varies by quarter, but in the ballpark of about mid 10s would be the portfolio rate that goes into motto for an average.
Q: What is your right to win in the apparel segment and have the same core communications at the company?
A: Yes. So we've got a going-in hypothesis, which is what I had shared a couple of quarters back when we had launched it, which was the going-in hypothesis being basically getting in the almost the best kind of technology with obviously the right kind of design as well as comfort fit, et cetera, right at a certain value proposition that we wanted to. But we felt that the consumers did give us the consumer dipstick response on it. The piece, however, that the -- and some of it was the going-in hypothesis. There is a lot of learnings that we have come. One clear case. I mean, there are maybe a half a dozen more, but one clear case that came was that as soon as we hit October, we were not ready for the weaker way. I mean, it's retrospectively sounds so obvious, but it is something that we were not ready for. And obviously, we'll make sure you're ready this time around. But the piece was that there are similar learnings on some other pieces. There's obviously enhancement of our understanding of that piece in there for technology and proposition that you want to get to consumers. It is a -- I would say the last quarter was the best that we have seen till now in terms of apparel contribution in the stores that you've launched. It is still below the threshold that will allow me to expand, but the trajectory gives me confidence. As I mentioned there for in H2, we want to double the number of store network. So as we fix the threshold.
Q: What are the trends in the sneakers segment and how is it impacting our business?
A: Yes. So actually and I say, sneakers, as I mentioned earlier, is actually, two- three segments perfect right. One is obviously performance. The second is lifestyle. There is also casual, which falls under the sneaker segment. And our sneaker studios has been an endeavour of bringing it all together. So it'll used lie within various parts of the store. And a part of all the renovation that
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
