Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin for Q1 FY25 stood at 47.1%, up by 220 basis points year-on-year.
- Retail sales accounted for 56.8% of revenue in Q1 FY25.
- The company added 20 new stores, bringing the total store count to 878.
- Distribution network now includes 755 distributors across 27 states and 5 union territories.
- The company is on track with its demerger process, having obtained shareholders' approval.
Negative Points
- Revenue from operations for Q1 FY25 was INR153.9 crores, down by 2.6% year-on-year.
- EBITDA for the quarter stood at INR17.4 crores, registering a degrowth of 4.8% year-on-year.
- Net profit for the quarter stood at INR0.7 crores, down by 60.2% year-on-year.
- Operating EBITDA margin for the quarter stood at 11.3%, down by 30 basis points year-on-year.
- Inflationary pressures and shifting consumer spending patterns negatively impacted demand.
Q & A Highlights
Highlights from Khadim India Ltd (BOM:540775, Financial) Q1 FY25 Earnings Call
Q: We have seen a sharp drop in retail demand last quarter. Do we see footfall improving in Q2, and how do we see the festival season demand coming up in Q3?
A: In August, with the Independence Day celebration, there was a demand for footwear, and sales were good. We expect demand to rise in September and October due to the festive season, leading to better sales after a muted first quarter. - Indrajit Chaudhuri, CFO
Q: Why did the distribution margins drop to 0.8% from 4.5%?
A: Distribution sales were lower compared to last quarter. Although there was margin improvement in gross margin, expenses and corrections led to the drop in EBITDA margin. - Indrajit Chaudhuri, CFO
Q: Are we expecting margins in distribution to return to older levels?
A: Yes, with improved sales in the second quarter, we expect EBITDA margins to stabilize at previous levels. - Indrajit Chaudhuri, CFO
Q: How has the performance of the sports and athleisure segment been?
A: Sports footwear contributed around 5% to 6% of total sales, with women's and kids' footwear showing more growth. Athleisure garments were recently launched and received a good response. - Indrajit Chaudhuri, CFO
Q: What is the status of the receivables payment from the Punjab government?
A: We have not recovered it yet but expect to recover INR32 crores within this financial year. - Indrajit Chaudhuri, CFO
Q: What is the progress on the demerger process?
A: We have received shareholders' approval and are in the final stages, awaiting court procedures. We expect the demerger to be completed by November or December. - Indrajit Chaudhuri, CFO
Q: Are the current challenges more environmental or company-specific?
A: The challenges are primarily macroeconomic. We have taken necessary corrections and believe that if the macroeconomic situation improves, our sales will increase. - Indrajit Chaudhuri, CFO
Q: What is the average order value in Q1, and how is it trending?
A: The average bill value was around INR940 to INR945, slightly up from INR900 to INR920 last year. - Indrajit Chaudhuri, CFO
Q: How many stores are EBITDA-positive at the end of Q1?
A: Most stores are EBITDA-positive. Last year, out of 240 COCO stores, only two were EBITDA-negative. - Indrajit Chaudhuri, CFO
Q: What kind of growth do you expect for Q2 year-over-year?
A: We initially expected 10% to 12% growth in retail for the financial year but now anticipate around 6% to 7% growth due to a good festive season and third quarter. - Indrajit Chaudhuri, CFO
Q: How is the omnichannel strategy progressing?
A: We have omnichannel capabilities in all our focus stores and are working to implement it in the top 200 stores post-festive season. - Indrajit Chaudhuri, CFO
Q: What is the status of inactive stores?
A: We have 136 inactive stores, which are not included in the overall store count. - Indrajit Chaudhuri, CFO
Q: What is the impact of BIS implementation on the footwear market?
A: BIS implementation is expected to benefit organized retailers. The government has extended the deadline for smaller suppliers, but medium-scale suppliers are already compliant. - Rittick Burman, Whole Time Director
Q: Are we planning to increase the number of COCO stores?
A: Yes, we plan to open 25 new COCO stores this year and have already opened eight to nine stores. - Indrajit Chaudhuri, CFO
Q: How are franchisee inquiries compared to pre-pandemic levels?
A: Franchisee interest is slightly lower due to increased operational costs, but we are still opening new franchisees and exploring new models. - Indrajit Chaudhuri, CFO
Q: What is the credit cycle for distributors?
A: The credit cycle is around 45 days. We aim to improve the working capital cycle and maintain competitive pricing without extending more credit. - Indrajit Chaudhuri, CFO
Q: How is the rebranding of old stores progressing?
A: We plan to renovate 20 stores this year and have already renovated seven to eight stores. Initial results show an uptick in sales, but a more comprehensive impact will be seen in the coming months. - Indrajit Chaudhuri, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
