Expect jewellery purchase to pick up in Q3: Titan CFO
There has been revival in August and we hope September will be reasonably decent as well.
You have managed a revenue growth of 20% in Q1 FY20, but that is history now. You have managed that in your watches segment. However, recently you have also trimmed your guidance to 12%. Why did you do that?
It is not that it has changed much. It is more about the overall sentiment. In the first quarter, the top line growth in watches was significantly higher because of various factors. One was, of course, that TCS order which was exceptional and the second was that we also advanced our activation, promotion to June which typically starts in July and that happened because of poor sales, the department stores advanced their promotions to June. We talked about this during the investor call as well that if we were to take out the exceptions which is the TCS order and this advance, we would have possibly entered at around 13% growth. So, that is the actual growth. 20% growth is an aberration for the first quarter. If we are saying we will do 12-13% for the year, that is reflecting the actual demand as we see it.
In your Q1 FY20 commentary, you were positive about achieving a 20% growth in the second half of FY20. Are you likely to maintain that?
It is a little too early to talk about revision. Internally, we are targeting a 20% growth in the second half in jewellery. This is essentially based on a few things. One, the number of stores which get opened in the second half will be higher. There has been some delay in the first half. So you will get some additional revenue from that.
Second, the fact that we believe a lot of the jewellery purchases in the first half is getting postponed because of the high gold price and therefore it is likely that people will come up when the wedding happens and that is largely in the third and fourth quarters, the festival season and so on. We believe there would be a shift in the purchasing pattern because of high gold prices and people will possibly come back in Q3 because they cannot wait anymore. The event is happening. This is one reason why we believe it is possible. But as I said, this is an internal target and we cannot say that we will achieve this for sure. But it is something we are gunning for.
Gold prices have touched the Rs 40,000 mark and consumer sentiment is being hurt. What has been the impact on Titan’s jewellery business and what kind of growth are you expecting in Q2?
I cannot give you growth numbers for Q2. We are in that quarter and obviously we do not talk about it right now until possibly at the end of the quarter when we give a note to the stock exchange as to how the quarter went.
We did mention earlier that July was as bad as the second half of June but there has been revival in August for sure. We also had our diamond promotion going on now but importantly some growth has just come back and it is not negative for sure. It is a decent growth and we are hoping September may also be reasonably decent but the big expectation is that quarter three could do as well as we had planned earlier.
What hope do you have for the jewellery segment this festive season when compared to last year?
We are starting to see revival in August for sure and hopefully it will continue going forward. Typically, when gold prices go up so sharply, it takes at least two to three months for people to get adjusted to the new price levels and therefore one is hoping that the next quarter will be better. In the first half, we are not going to be anywhere near the 20% growth that we talked about. It is clearly a miss because of a month and a half of poor sales growth, but other than that it is not so bad. One is hoping that things will start getting better now.
Recent trades have been showing that customers have been downtrading. What is your ticketing price? Have you also witnessed such kind of trends?
I have not seen such a trend in our businesses. If you look at each of the brands that we have and watches is a good case in point, we have not seen any significant slowdown in Titan as a brand because that is the more premium brand. It is still doing well.
With the slowdown, are you planning to tone down your investments, advertising and expansion spends for the coming quarters at all?
No, not at all, If anything, we would be focusing more on our network rollouts. We have planned close to 70 stores this year. We are running a little behind schedule on that a little but hopefully by the second half, we expect to catch up. So, there is a zero intent to slow down on network rollout. It is a great opportunity when we have a balance sheet which is far stronger than anyone else in the competition. This is the time to roll out and increase the disparity in the network between us and the rest of the competition.