Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vedant Fashions Ltd (BOM:543463, Financial) maintained healthy financial margins and profitability metrics despite a challenging quarter.
- The company reported an EBITDA margin of 47.8% and a PAT margin of 26.1%, reflecting robust financial fundamentals.
- Vedant Fashions Ltd (BOM:543463) has a healthy pipeline for new store rollouts planned for the remaining part of the financial year.
- The company has focused on enhancing back-end business dynamics, including training and effective administration of its retail network.
- Positive consumer feedback and high conversion rates were reported for new Twamev and Mohey stores, indicating strong brand reception.
Negative Points
- Q1 FY25 was significantly impacted by extremely low or negligible wedding dates, resulting in a performance akin to a non-wedding quarter.
- The company saw a decline in turnover, which led to a sharp decline in other expenses, including a 22% drop in job work costs.
- Vedant Fashions Ltd (BOM:543463) closed about 23 stores, primarily in Tier 3 cities, due to market shifts and strategic decisions.
- Ad spends were materially cut down this quarter amid rising competition, which could impact brand visibility.
- The company faced challenges in Tier 2 and Tier 3 cities, which were major laggards in performance compared to Tier 1 cities.
Q & A Highlights
Q: In this quarter, we have seen not only the absolute store network going down, but we've also seen some cities being closed. Are there further store closures planned in the coming quarters ahead?
A: Vedant Modi, Chief Revenue Officer: The cities we left are Tier 3 cities, often dependent on larger nearby cities where we've opened larger stores. We closed about 2-2.5% of our retail fleet as part of keeping the fleet updated. We plan to focus on store openings in the later part of Q2 and early Q3.
Q: How has the season been panning out, especially Q2, given the fact that this time around we have around six to seven wedding days in Q2? Also, any updates on the new festive brand launch?
A: Vedant Modi, Chief Revenue Officer: July has been good, reinforcing our confidence for the remaining nine months. The new festive brand is ready and will be launched within the next two to three months, focusing initially on online and dealer networks.
Q: On the wedding dates part in 2H, is it just the difference of three days which is exhibiting in the confidence? Or is it also a tepid consumption environment, which was there last year and you don't foresee that happening this year?
A: Vedant Modi, Chief Revenue Officer: The spread of wedding dates is more important than the quantity. Last year, weddings started late in November, whereas this year, they start early in November, giving us a full six months to do business in Q3 and Q4.
Q: We've seen a sharp decline in other expenses, particularly ad spends. Can you provide some color on this?
A: Vedant Modi, Chief Revenue Officer: We hired a new creative agency to rethink our strategy. We focused on core hygiene pieces of A&P in Q1, saving funds for the later part of the year when the wedding season picks up.
Q: Do you see any consumer slowdown across the wedding segment, or is it just that maybe we are losing share?
A: Vedant Modi, Chief Revenue Officer: Our dealer network was weaker than our EBO performance, but recent bookings show good confidence. There was no down-trading, and our ASPs have been rising, indicating no market share loss to the unorganized segment.
Q: How are the new Mohey and Twamev stores performing?
A: Vedant Modi, Chief Revenue Officer: Performance has been good, especially with Twamev. Conversion rates are high, and consumer feedback is positive. We will have a better understanding after a full quarter of business.
Q: Can you provide an update on the number of store closures and the retail expansion aspirations?
A: Vedant Modi, Chief Revenue Officer: We closed about 23 stores, mostly replacements. Our retail expansion is planned for H2, and we aim to achieve our target of 14-15% net area addition.
Q: How is the competition from the organized segment shaping up?
A: Vedant Modi, Chief Revenue Officer: Our internal study shows that stores next to competition have a 4% positive delta. The impact has been more due to wedding dates and economic conditions rather than competition.
Q: What is the EBO rollout plan for Mohey?
A: Vedant Modi, Chief Revenue Officer: We plan to open Mohey EBOs in the top five to six wedding markets of India by the end of the year, with some openings in early next year.
Q: Can you provide some insights on Twamev's opportunity size and current performance?
A: Vedant Modi, Chief Revenue Officer: Twamev caters to a high-income segment and is expected to account for 15-20% of the market in the next three to four years. The brand has been growing faster than the company average, and we plan to open stores in the top 30 wedding markets of India.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
