May 2024 Concall Notes
Management Views on Business
- Management optimistic about company’s growth and strategic focus
- Company aims to open additional store capacity of close to 90,000 square feet mainly in Tamil Nadu
- Belief in selling experiences and expanding retail footprint in ethnic retail market in India, particularly in Tamil Nadu
- Focus on improving cash flow conversions by reducing liabilities and negotiating better cash discounts in markets
Financial Performance:
- Revenue for Q4 FY’24 was INR 359.6 crores, compared to INR 323 crores in the previous year.
- Gross margin improved to 40.97% from 39.77%.
- PAT for the quarter stood at 28.73, a growth of 41.95% compared to the previous year.
- Full year PAT was 100.87, a growth of 3.36% compared to the previous year.
- Inventory write-off around 1% annually.
- Planning to declare inventory write-off as a separate line item.
- Store closures not mentioned.
- Revenue contribution: Varamahalakshmi (42%), KLM (38%), Kalamandir (16%), Mandir (4%).
- Store level margins: Varamahalakshmi (33-34%), KLM (24-25%).
Operational Highlights:
- Added three new stores in Q4, totaling 22,750 square feet of retail area.
- Upgraded one store from Kalamandir format to Varamahalakshmi format.
- Planning to open additional store capacity of around 90,000 square feet in the current financial year.
- Active customer base stands at 6.5 million with a focus on expanding in Tamil Nadu.
- Completed integration of Salesforce with the ERP system for digital marketing campaigns.
Cash Flow Management:
- Negative operating cash flow in the current year due to a focus on improving the balance sheet by reducing liabilities.
- Reduction in creditors’ levels to improve margins in the coming years.
- Utilizing IPO funds for investing activities in the current and next year.
Expansion and Growth Strategies
- Opening 13 Varamahalakshmi stores this year with larger store sizes in cash-rich centers
- Targeting positive Same Store Sales Growth (SSSG) of 2-3% and improving EBITDA margin
- Expansion into Tamil Nadu market with Varamahalakshmi stores
- Majority of customers purchasing for weddings, with a younger generation increasing in Indian census data
Marketing and Sales Strategies
- Increasing digital platform usage for marketing, including influencer collaborations on social media and e-commerce
- Doubling digital ad spends while reducing offline spends on newspapers and television
- Store inaugurations blend offline and online marketing efforts with influencers, celebrities, and social media content creation
Inventory and Operations
- High inventory levels due to industry’s requirement for high throughput
- Efficiencies in inventory management pursued through sarees and cluster inventory management
- Expectation of improved inventory turnaround in the coming quarters
SSG Growth
- SSG growth for the last quarter was 3%, with a target to maintain this level.
- SSG for the full year of FY '24 was -6%.
Customer Behavior
- Repeat purchase is tracked over a trailing 12-month period using a unique phone number for each customer.
- Customer profiling is done to understand purchase behavior and preferences.
- Customers often purchase sarees in groups for various events, not just weddings.
Product Mix:
- 70% revenue from sarees.
- Pure silk sarees contribute over 25%.
- Other products include women’s lehengas, kurta, kurtis, men’s occasion wear, kids occasion wear, and accessories.
- Men and kids wear contribute around 15-18% of revenue.
Future Outlook:
- Optimistic about the company’s growth potential.
- Strategic store expansion to capture market share.
- Focus on improving inventory management and reducing costs.
- Utilizing technology for targeted marketing and customer engagement.
- Confident in the long-term relevance of saree wearing, especially in South India for weddings and occasions.
- Prepared to adapt the product mix and marketing strategies as the market evolves, including a focus on digital platforms and influencer marketing.
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