Release Date: May 26, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brand Concepts Ltd (BOM:543442, Financial) achieved a significant year-on-year revenue growth of almost 90%, with improvements in EBITDA, PAT, and EBIT levels.
- The company experienced holistic growth across all channels, including online, offline, large format stores, department stores, and its own stores.
- Brand Concepts Ltd (BOM:543442) signed two new brands, United Colors of Benetton and Aeropostale, which are expected to contribute positively to future growth.
- The company has reduced its dependence on China for supply chain needs, focusing more on local sourcing and developing factories in India.
- Brand Concepts Ltd (BOM:543442) has shown strong financial management, with improvements in debtor days, stock levels, and creditor days, indicating better working capital management.
Negative Points
- The company acknowledged that seasonality affects its quarterly performance, with Q4 traditionally being the weakest due to end-of-season sales and markdowns.
- Despite the overall growth, the contribution margins have slightly decreased due to increased selling and distribution expenses, particularly from marketplace activities.
- The company faces challenges in maintaining high EBITDA margins while pursuing aggressive growth targets, which may lead to some margin pressure.
- Brand Concepts Ltd (BOM:543442) is still underpenetrated in certain regions, particularly in the South, indicating potential but also highlighting current limitations in market reach.
- The company has a significant reliance on its primary brand, Tommy Hilfiger, which contributes to over 80% of its sales, posing a risk if there are any issues with this brand.
Q & A Highlights
Q: Can you provide guidance on EBITDA margins considering the addition of two new brands?
A: We aim for a 30% CAGR growth over the next three to five years, targeting INR500 crore in revenue within four years. Despite high growth, we plan to maintain our EBITDA and PAT margins. (Abhinav Kumar, CFO, Whole-time Director)
Q: Is it challenging to achieve quarter-on-quarter growth due to seasonality?
A: While we aim for consistent growth, seasonality does impact results. Q4 is traditionally weaker due to end-of-season sales and inventory management practices. (Abhinav Kumar, CFO, Whole-time Director)
Q: Will the guidance of 30% topline growth be revised given the addition of new brands?
A: We prefer to under-promise and over-deliver. We aim to exceed our guidance consistently. (Abhinav Kumar, CFO, Whole-time Director)
Q: How did the tie-up with United Colors of Benetton (UCB) come about, and what does it mean for future brand partnerships?
A: The tie-up process took 6-8 months, involving extensive background checks and alignment on brand positioning. This partnership strengthens our ability to attract more heavyweight brands. (Abhinav Kumar, CFO, Whole-time Director)
Q: What is the exclusivity arrangement for UCB products?
A: We hold exclusive licenses for UCB in travel gear, small leather goods, and women handbags across all channels in India. (Abhinav Kumar, CFO, Whole-time Director)
Q: Can you provide store economics for your existing stores?
A: In metros, we achieve sales per square foot per day (SSPD) of 85-90, translating to INR13-15 lakh per month for a 500 sq. ft. store. Tier 2 cities achieve 65-70% of these numbers. (Abhinav Kumar, CFO, Whole-time Director)
Q: What are the expectations for revenue from the new brands this year?
A: We expect the new brands to contribute around 8% to our overall growth, with launches planned before Diwali. (Abhinav Kumar, CFO, Whole-time Director)
Q: How will the addition of new brands impact your product mix?
A: Travel gear and women handbags will see increased contributions, with travel gear potentially reaching 40-50% and small leather goods around 30-35% of our sales mix. (Abhinav Kumar, CFO, Whole-time Director)
Q: What is the status of your manufacturing plans and its expected benefits?
A: We are setting up a hard luggage manufacturing facility, which will enhance our EBITDA margins, quality control, and product differentiation. (Abhinav Kumar, CFO, Whole-time Director)
Q: How do you plan to manage working capital and maintain financial prudence?
A: We have significantly improved our working capital cycle and will continue to manage it prudently, ensuring financial health and sustainability. (Abhinav Kumar, CFO, Whole-time Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
