BSE:540210 | NSE:TMRVLBE | 58888: | IND:Retail - Apparel/Accessories | ISIN code:INE759V01019 | SECT:Retail
The Gross Domestic Product (GDP) growth rate was lower at 6.7% and that impacted your Company’s business. At micro industry level, the competition was intense with ‘market share at any cost’ strategies employed by global entrants in the market. The combative market participants advanced the end of season sale dates and the duration of such sales also increased. This meant larger proportion of volumes were sold at discounted prices. Despite competitive intensity, the Company volumes grew by 11% in domestic market and by 15% in exports.
This represents domestic market growth rate at 1.65 times the GDP growth rate (6.7%) and 1.2 times the rate forecast (9%) for the apparel industry by experts. And this signals steadily increasing market penetration for the Company brand which is good news indeed.
Higher discounts affected the revenue growth with a marginal reduction of 0.05% in revenue over last year. Company revenues for the year stood at C259.44 crores. The Company management had to contend with supply chain problems; inadequate working capital took its toll delaying the new season supplies to the stores. Needless to say the Company missed selling opportunities during some crucial days of the season. The pressure on net realisations due to higher discounts was exacerbated by some significant increase in employee costs. The Company has suffered significant drop in EBITDA margins this year under review. Your board and the management is working to rectify structural issues within the organisation as well as with working capital finances.
THE MARKET AND THE CONSUMER
By all accounts, the long-term trends in the Indian apparel market continue to be positive. The market is expected to grow between 9-10% on CAGR basis to year 2020. Increase in personal incomes, higher aspirational levels in Tier II, III and IV towns and all round growth in consumerism will continue to drive the growth in apparel market. However, the segments within display differential growth rates. The product segments where your Company always had significant offerings namely denim wear and T-shirts for men continue to be high growth market segments expected to continue to grow at 14%. Active wear market has emerged as a high potential category due to the boom in fitness and healthcare related consumption. Your Company is well placed in this segment due to its association with Mr. Salman Khan who is universally followed for his fitness and sculpted physique. While these are broad trends, the market is given to rapidly changing styles and preferences.
Your management has evolved a market sensing system that will keep the Company product portfolio in sync with changes and capitalise on them.
LAUNCH OF ‘CORE LINE’
Your Company during the year has formulated the ‘Core Line’ design concept. ‘Core Line’ has a simple design elements that can be assembled into basic products that can be offered year round at multiple price points. This will enable moderation in discounting and result in better inventory turnarounds. Your management expects the ‘Core Line’ to account for 1/4th of Company volumes in near future. ‘Core Line’ will be launched within next 45 days.
By all accounts e-commerce is going to be very influential channel for retail. According to Boston Consulting Group (BCG), a consultancy, fashion is the first category that most Indians (28%) buy online; mobile phones follow at 20%. This message is not lost on your management. BCG study shows that 50% of those who buy fashion online are from Tier II and smaller cities, a geography that is of strategic importance to Company products. Nearly 2/3rd of online buyers are below the age of 35 according to BCG and that is precisely the Company’s current target segment. Your Company therefore has been expanding its online retail by tying up with online retailers like Cloud Tail and Jabong. Company is readying a new line of apparels that will be exclusively sold online. At opportune time in future the Company may launch its own platform for online sales. I assure you that there are many such exciting ideas on the drawing board.
The licence arrangement with Being Human Foundation is the core asset of the Company. The Company management in active collaboration with the Foundation Trustees has nurtured this brand assiduously. I, on behalf of the board, acknowledge inspired contribution made by Mrs. Alvira Agnihotri, the head of the Foundation, towards building the brand and the market for ‘Being Human’ clothing line. Licence fees that the Company pays has been one of the sources for the Foundation to carry out its singularly philanthropic work in the area of education and health. The licence agreement will be renewed well before its current term that lasts up to March 2020.
Dynamic young team is one of the core strengths of your Company. The team is focused and has a great eye for aesthetics and detail. Some of you who have visited Company outlets must have noticed the distinct look and feel of its decor. The earthy and intimate look and feel is the design work of young Karan Berry and his in-house team. The team is working on new scheme that is economical, adjusts to smaller spaces without losing customer intimacy and appeal.
I must also mention here that Mr. Hemant Gupta has recently joined as the Chief Financial Officer and Chief Operating Officer. Young Hemant brings with him a decade and more of experience with branded retail with companies such as Blackberry and Carrefour. He will bring intensity of youth and sharpness of experience to husband the operations that are getting larger and complex by the day. I welcome him and look forward to a robust and rewarding association.
There is good news on the national economy. The latest quarterly numbers show GDP growth at 7.7%, so far the highest in last 4 years. This will lead to higher personal incomes and private consumption. The Government has promised remunerative minimum support prices to farmers. These flows will course through the economy creating solid demand for apparels. Your management has lined up new products and new product lines I mentioned earlier. The management team is working vigorously to make up the gaps in working capital that affected deliveries last year.
This together with selective and well calibrated expansion of geographic footprint in Tier II and smaller cities, the Company hopes to achieve robust growth in volumes and retrieve the lost ground in revenue and margins. The management is also regrouping initiatives in export markets. The increasing current account deficit is a boon in a way since resulting depreciation of Indian rupee will help boost exports. All in all, we look forward to a good year.
I take this opportunity to thank all stakeholders including the Being Human Foundation and marquee investors who have continued to repose confidence in your Company.
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