Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successful acquisition of a 50% stake in Kraus Casuals Private Limited, enhancing the company's presence in the women's denim and casual wear category.
- Encouraging results from the recently introduced Kidswear Clothing brand, Junior Killer, indicating potential growth in the children's apparel segment.
- Net addition of 17 Exclusive Brand Outlets (EBOs) in Q1 FY25, bringing the total to 505 EBOs, which is expected to enhance brand visibility and national footprint.
- Strong in-house manufacturing capabilities and robust supply chain management, positioning the company advantageously in the current geopolitical climate.
- Optimistic outlook for the upcoming quarters, driven by anticipated market improvement, upcoming festive and wedding seasons, and government focus on consumption revival.
Negative Points
- Q1 FY25 started on a muted note with sales of INR151 crores and an EBITDA of around INR28 crores, impacted by continued slowdown in consumer sentiments and prolonged heatwave conditions.
- Lower footfall during the period due to adverse weather conditions and fewer weddings, negatively affecting performance.
- Non-retail performance was lower, particularly in the Multi-Brand Outlets (MBO) channel, which closely responds to market sentiment.
- Negative same-store sales growth (SSG) of around -10% for the quarter, indicating challenges in driving sales growth in existing stores.
- Despite adding 52 stores in the last 15 months, the new stores have not significantly contributed to the overall revenue of the EBO channel as expected.
Q & A Highlights
Q: Are there any write-offs or returns during this quarter that may have impacted performance?
A: There have been no write-offs or returns beyond the ordinary course of business. (Pankaj Jain, President)
Q: Does the double-digit growth expectation for FY25 include Kraus?
A: Yes, the double-digit growth expectation includes the inorganic portion of Kraus. (Pankaj Jain, President)
Q: How soon do you feel that demand can revive, considering the current market sentiment?
A: We expect the second half of the second quarter to show better consumer sentiment, with more positive results anticipated in quarter 3. (Pankaj Jain, President)
Q: What is the strategy for Kraus Casuals in terms of distribution and market ramp-up?
A: We received positive feedback from customers across all regions. Initially, we will take it slow to set the market, with bigger traction expected in the next season. (Ravi Punjabi, Managing Director, Kraus Casuals)
Q: What is the go-to-market strategy for Junior Killer, and how do you plan to position it in the competitive market?
A: We see a vacuum for premiumization in this category. Our primary competition is with brands like US Polo Kids. The first channel we are exploring is large format stores (LFS) and distribution. (Pankaj Jain, President)
Q: Could you provide more details on the performance of the MBO channel and inventory levels?
A: The MBO channel's performance closely aligns with market sentiment, which was lower this quarter. Inventory levels have gone down, and there is no excess inventory in the channel. (Pankaj Jain, President)
Q: What are the expected synergies from the Kraus acquisition, and how will it impact margins?
A: We expect economies of scale to reduce production costs and higher margins from entering the MBO network. This should improve margins over the next couple of years. (Ravi Punjabi, Managing Director, Kraus Casuals)
Q: What is the expected growth for the core KKCL brands excluding Kraus?
A: On an organic level, we expect single-digit growth, with double-digit growth on a consolidated level including Kraus. (Pankaj Jain, President)
Q: How has the core denim segment performed this quarter?
A: The denim segment has performed flattish in terms of revenue. (Pankaj Jain, President)
Q: What are the price points for Junior Killer products?
A: T-shirts range from INR799 to INR1,599, jeans from INR1,699 to INR2,299, and cargos from INR1,899 to INR2,299. (Pankaj Jain, President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
