Ethos Limited Earnings Calls: Q1 & Q2 FY25
Financial Performance:

• Revenue from operation increased by 18.8% year-over-year to INR 273.2 crores and increased by 26.3% year-over-year to INR 297.1 crores. H1 FY25 revenue stood at INR 570.4 crores, up 22.6% year-over-year.

• In the Q1 FY25 EBITDA grew by 28.7% to INR 49.7 crores with a margin of 17.8% and for Q2 FY25 it expanded by 45.1% to INR 44.4 crores with a margin of 17% . H1 FY25 EBITDA stood at INR 98 crores, up 22.2% year-over-year. EBITDA margin were 16.8%.

• The company’s H1 FY25 PAT increased by 19.9% year-over-year to INR 44 crores, driven by a 25.6% growth in Q1 FY25 to INR 22.8 crores with 8.3% margin and a 14% growth in Q2 FY25 to INR 21.2 crores with 7% margin.

• Ethos recorded a foreign exchange loss of INR 4.65 crores in Q2 FY25, due to fluctuations in the value of the Indian Rupee (INR) against the Swiss Franc (CHF).

• The company’s H1 FY25 average selling price (ASP) increased to INR 2,15,952, up from INR 1,87,000 in H1 FY24. The company’s H1 FY25 same-store sales growth was 15.5%.

• As of June 30, 2024 (Q1 FY25), inventory days stood at 156, increasing to 177 by September 30, 2024 (Q2 FY25), driven by investments in new brands and store openigs, with plans to reduce them as the market matures.

Stores and Brand expansion:

• Ethos opened 3 new stores in Q1 FY25 in Kochi, Dehradun, and Pune. Between April 2024 and November 8, 2024, the company opened 12 new stores at a cost of INR 35 crores and plans to open 13 more by the end of FY25. Management sees an opportunity to open 20+ stores annually over the next five years.

• Management noted that approximately 20% of Ethos’ stores were under renovation during Q2 FY25, in anticipation of new brand launches.

• Ethos added three more exclusive brands between April 2024 and November 8, 2024: ID Genève, Singer Reimagined and Hautlence. Exclusive brands accounted for 31% of total revenue in Q2 FY25.

Lifestyle Division:

• RIMOWA boutique in Mumbai is profitable and delivers strong sales per square foot. The company plans to open seven to eight new RIMOWA boutiques over the next five years

• Ethos plans to open its first Messika boutique in Delhi in January or February 2025. Ethos operated a Messika “pop-up” shop in Delhi in the lead-up to the boutique opening. Management plans to open eight to ten more Messika boutiques over the next five years.

• Ethos is in discussions with 7 or 8 other brands in the Lifestyle segment. The company plans to announce new partnerships in the Lifestyle segment in the coming quarter.

CPO Division:

• In H1 FY25, revenue grew by 33% year-over-year to INR 43 crores, driven by a 31% increase in Q1 FY25 to INR 19.6 crores and INR 23 crores in Q2 FY25
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• Management noted that the growth of the CPO division has been constrained by the availability of certified pre-owned watches and a shortage of watchmakers to service watches

Future Outlook and Challenges:

• Management expects that the EFTA agreement will be implemented before the end of FY25.

• Management’s long-term vision is for Ethos to become a leading luxury retailer in India. The company is targeting a 10x increase in revenue over the next 10 years.

• Management expressed confidence in its ability to manage the impact of a potential increase in the GST on luxury watches from 18% to 28%.

• Ethos plans to launch Favre Leuba in India in January 2025. Ethos has already received pre-orders for more than 100,000 Swiss Francs

• Ethos has a dedicated in-house design team that creates limited edition watches for India in partnership with brands. Ethos has already received INR 70 crores in orders for limited edition watches that will be delivered in the coming year.

Disclosure: Invested