Campus Activewear – betting on the India Consumption Theme

Campus Q1FY24 Earning updates

Weak quarter from campus. Revenue of 353.8Cr, 4.8% growth YoY.
Trade distribution down by 5.5%, D2C online up by 10% and D2C offline up by 82%.
EBITDA and PAT margin stable at 18.8% and 8.9% respectively.
Witnessing green shoots of recovery in eastern UP and parts Bihar, Expect full blown recovery by festive season.

Comments from Earning call:
Nikhil Agarwal emphasizes their brand’s unique selling point (USP) of introducing the latest global fashion trends and designs to India promptly and affordably. They maintain a vast portfolio of 600 designs, including 300 new ones annually, highlighting their commitment to offering fashionable and technologically advanced products ahead of competitors.

Improved gross margin is attributed to favorable changes in channel and product mix, along with sourcing efficiencies. The sustainability of this margin improvement is linked to the company’s consistent growth trajectory, and there is potential to improve it further.

growth in D2C offline driven by franchise stores. Out of 255 stores 90-95 are company run stores rest franchise. Strategy to have 70:30 split in favor of franchise.

Nikhil anticipates a positive impact on domestic growth through the implementation of the BIS regulations starting January 2024. By focusing on premiumization within the price range of Rs. 1,000 to 3,000, the company aims to capitalize on the BIS-driven reduction of imports from China, Vietnam, and Indonesia, ensuring not only improved margins but also a rise in average selling prices (ASP) within the optimal price range.

The company’s historical growth trajectory, with a 3-year and 5-year CAGR of around 24% to 27%, has been maintained even in recent times. While some shifts in margin profiles have occurred, their priority in a slowdown scenario remains focused on pursuing growth aggressively while maintaining a respectable margin profile, as margins can be regained in stable macro conditions. Gaining market share and shelf space is emphasized as a crucial strategy, considering its lasting impact compared to recoverable margins, making slowdown periods seen as opportunities to excel.