Release Date: February 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brand Concepts Ltd (BOM:543442, Financial) reported a strong quarter-on-quarter growth of 44-45% from the previous year.
- The company has seen positive growth in its offline divisions, expanding and penetrating various regions across the country.
- Gross margins have improved, indicating better cost management and profitability.
- The marketing campaign featuring Arjun Rampal has been successful in enhancing brand perception and long-term strategy.
- The company is expanding its product portfolio with new brands like Benetton and Aeropostale, which have received positive market feedback.
Negative Points
- There has been a slowdown in corporate sales, which impacted overall revenue growth for Q3.
- E-commerce sales, particularly on the B2B side, experienced a temporary dip quarter-on-quarter from Q2 to Q3.
- The rollout of new brands has been delayed by 30-45 days, affecting the planned timeline.
- Marketing expenses have increased significantly, rising from 1.9-2% of turnover last year to over 5% this year, impacting margins.
- The company is facing challenges with space constraints in stores as it continues to add new brands, requiring strategic adjustments in merchandise mix.
Q & A Highlights
Highlights of Brand Concepts Ltd (BOM:543442) Q3 FY24 Earnings Call
Q: Hi, Abhinav, good to see the revenue numbers sustaining, but I have a small concern on the margins taking a hit. Is that particularly because of the World Cup revenues?
A: Yes, Devrat, the increased marketing spend, particularly the World Cup campaign, has impacted margins. Our marketing spend rose from around 2% last year to over 5% this year. This was a strategic decision to solidify our brand position, especially for Bagline, targeting both B2C and B2B markets.
Q: How is the new factory coming along? And how's the merger with IFF Overseas?
A: The merger is underway, with SEBI approval expected soon. The effective merger date is April 1, 2024. Regarding the new factory, Bhoomi Pujan is done, and construction is expected to start in March. We aim to begin production by Q1 FY25.
Q: Sir, I believe we have silently added products from the guest brand. Can you shed some light on them?
A: Yes, we experimented with related categories and outside brands like Travel Blue and Guess. This has shown good results, and we plan to include Tommy women handbags in our stores from this season onwards.
Q: How are we going to solve the problem of space constraint as we keep adding new brands?
A: We are now taking bigger stores, around 700-750 square feet, to accommodate more brands. We will also tailor the merchandise mix based on the store location, focusing on premium brands in Tier-1 cities and value brands in Tier-3 and Tier-4 cities.
Q: What's the response from the World Cup advertisement in terms of franchisee enquiries?
A: The response has been very positive. We are getting franchisee enquiries, and the Borivali store is a franchisee store. Our recent trade show in Indore also solidified our position in the market.
Q: Can you give some picture towards the new deal that we have signed with Tommy Hilfiger? Is the royalty higher or it's in the same ballpark figure?
A: Due to NDAs, I can't disclose commercial terms, but it's in a similar genre. The agreement is signed for three years till 2026, aligning with their international cycle.
Q: What is the cost associated with signing a new brand? Is it a one-time expense or recurring?
A: The upfront investment is usually under INR 1 crore, primarily for opening moulds and initial setup. The significant investment is in working capital, which can range from INR 10 crore to INR 15 crore depending on the brand's size.
Q: Post World Cup advertisement, what is the response from franchisee enquiries?
A: The response has been very positive. We are getting franchisee enquiries, and the Borivali store is a franchisee store. Our recent trade show in Indore also solidified our position in the market.
Q: How should we see the marketing spends going ahead? Will it be closer to that 4-5% number or lower?
A: It will be lower than 5%. We don't attribute our growth solely to high-decibel marketing campaigns. We focus more on experiential and below-the-line marketing activities. We aim to maintain around 3-4% marketing spend going forward.
Q: What is the share of Tommy sales this quarter?
A: Tommy sales contributed roughly 80% this quarter, with UCB taking around 10%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
