Release Date: May 01, 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) successfully expanded its retail footprint by approximately 2.34 lakh square feet in FY24, demonstrating a commitment to enhancing the shopping experience.
- The company reported a revenue growth of 6.3% in Q4 FY24 compared to Q4 FY23, with revenue from operations around INR 363 crores.
- Vedant Fashions Ltd (BOM:543463) maintained industry-leading gross margins of around 67.1% and EBITDA margins of 49% in Q4 FY24.
- The company launched its first exclusive brand outlet (EBO) for the Mohey brand, measuring about 7,500 square feet in Bengaluru, indicating a strategic move to enhance brand presence.
- Despite a challenging year, the company maintained a healthy cash conversion ratio of approximately 81.4% and a robust return on capital employed (ROCE) of around 85.3%.
Negative Points
- The overall performance in FY24 was impacted by significantly lower weddings and muted consumer sentiment, leading to a challenging business environment.
- Receivables increased from around 130 days to 150 days, indicating potential issues with cash flow management and credit policies.
- The proportion of stores where Vedant Fashions Ltd (BOM:543463) pays the rent increased, potentially leading to higher operational costs.
- The company faced a higher base effect from the previous year, which was post-COVID, making year-over-year comparisons less favorable.
- The first quarter of FY25 is expected to be weak due to almost no wedding dates, which could impact short-term revenue growth.
Q & A Highlights
Q: I noticed that the receivables on a full-year basis have gone up from around 130 days to around 150 days this year. Any change in policy regarding credit for the franchises?
A: (Rahul Murarka, CFO) The receivable days have increased to around 64 days due to the addition of new retail space. The increase in primary and secondary revenue is in a similar direction, and the operating cash flow/PAT is around 81.4%. The overall working capital has been efficiently maintained at 88 days.
Q: The rent from the cash flow statement and the ROU assets in the balance sheet have seen higher growth versus the overall retail area added. Is there an increase in the proportion of stores where you pay the rent?
A: (Rahul Murarka, CFO) Yes, around 65% of the revenue comes from stores where we pay the rent, which is consistent with last year. The focus has been on entering core markets of India, which has resulted in a higher proportion of leased stores.
Q: Can you give a sense of the overall demand environment in the last quarter and your outlook for the coming year?
A: (Vedant Modi, CRO) The financial year was impacted by lower weddings, weaker consumer sentiments, and a higher base effect from the previous year. We are hopeful that things will normalize from Q2 onwards, given the positive mid- to long-term outlook for India.
Q: What gave you the confidence to open the Mohey store, and how has it performed so far?
A: (Vedant Modi, CRO) Mohey has been performing well in Manyavar Mohey stores, which gave us the confidence to pilot an exclusive Mohey store. The initial consumer feedback and conversion rates have been positive, and we plan to pilot more stores in the coming quarters.
Q: Can you explain the increase in other income this quarter?
A: (Rahul Murarka, CFO) The increase in other income is mainly due to higher finance income, driven by improved cash balances and better yields on investments.
Q: Why are the new stores not coming in at productivity levels seen till FY23?
A: (Vedant Modi, CRO) Newer stores take about two years to mature, and this year being weaker, they have taken longer to reach typical first-year levels. The larger store sizes are futuristic decisions, and we expect them to perform better as consumer sentiments rebound.
Q: What is your strategy for store openings in FY25?
A: (Vedant Modi, CRO) We plan to continue our strategy of opening stores in Tier 1 and Tier 2 cities, with a similar mix of lease costs borne by us and franchise partners. The focus will be on opening stores in the later part of Q2 and early Q3, given the lack of wedding dates in Q1.
Q: How has Twamev performed, and what is the strategy going forward?
A: (Vedant Modi, CRO) Twamev has performed well, with positive consumer feedback and good conversion rates. We plan to continue opening stores in the best markets and have made changes to CRM practices to better cater to premium consumers.
Q: Are you seeing any impact from the unorganized market due to muted wedding demand?
A: (Vedant Modi, CRO) Based on our MBO data and feedback from top multi-brand outlet partners, the unorganized market has not gained market share. The overall market has been impacted by lower weddings and weaker consumer sentiments.
Q: What is the status of Project Manthan, and when can we see it scale up?
A: (Vedant Modi, CRO) We are excited about Project Manthan and plan to present it in the next one to two quarters. The project is ready to be taken to the next level, and we will be rebranding and scaling it up.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
