Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Smooth management transition with Venkatesh Vijayaraghavan taking over as CEO and MD designate.
- Exclusive business channels, modern formats, and e-commerce performed extremely well.
- Robust profitability despite market challenges.
- Significant investments in R&D and capability building to drive future growth.
- Double-digit growth observed in June, indicating a potential market recovery.
Negative Points
- Flat top-line growth for the quarter, impacted by slow sales in April and May.
- General trade and rural markets remain subdued, affecting overall performance.
- Operating EBITDA margin dropped to 10.8%, with future pressure anticipated from commodity costs.
- Consultancy costs of INR 12 crores impacting profitability.
- Challenges in the UK market with no immediate signs of improvement.
Q & A Highlights
Q: You mentioned about the liquidation of stocks in April and May in the general trade channel. Is this a normal course of business or was there an unusually high level of inventory? Would you say that June's double-digit growth is more representative of end-level demand?
A: We definitely see June's growth as based on robust demand. General trade is yet to come back fully, with more robust growth seen in large-format stores, e-commerce, and our own retail stores. The initial months were a combination of inventory and demand factors, but we believe general trade will pick up in subsequent quarters.
Q: Is general trade losing share to modern formats, or is it just a matter of inventory levels?
A: There is a share of wallet transfer happening towards large-format stores and e-commerce due to aggressive openings and quick commerce. This shift impacts general trade, but within general trade, some parts are growing better than others. This is more of a shift towards organized retail.
Q: On the margin front, even with subdued top-line growth and inflation, the company has managed operating EBITDA margins in the range of 12% to 14%. This quarter, it's at 10.8%. Where should one look at EBITDA margins for this year?
A: It's too early to comment definitively. We are making substantial investments for future growth, and this number should be seen in that context.
Q: From a longer-term perspective, growth has been subdued at 4%-5%. What can investors expect from the company moving forward?
A: Our focus is on robust top-line growth, driven by premiumization, innovation, and quality. We aim to grow faster than the market by increasing market shares in core categories and introducing new products. We also plan to maintain strong cash flows while making necessary investments.
Q: Can you elaborate on the consultancy costs and their impact on profitability?
A: We have disclosed that the initial phase of consultancy will cost around INR 12 crores. This investment is part of our strategy to build capabilities and drive future growth.
Q: What is the current status and future vision for Prestige exclusive stores?
A: We have around 656 stores across 361 towns, primarily franchise-led. The store sizes vary from 600 to 900 square feet. These stores contribute 12%-15% of our revenues, and we plan to expand them further.
Q: Are there any white spaces in your portfolio where you plan to enter?
A: Currently, we are focusing on scalable categories where we are not market leaders. We are evaluating new opportunities and will provide updates as they materialize.
Q: How has the rural market performed, and what is the outlook?
A: The rural market has been subdued, partly due to elections and macroeconomic conditions. We expect improvement as the market dynamics stabilize.
Q: What are the key initiatives to drive growth in the festive season and beyond?
A: We plan to leverage the festive season with new product launches across appliances, cookware, and other categories. We have already launched 39 SKUs in the first quarter and will continue to introduce more products to drive growth.
Q: How do you plan to balance in-house manufacturing and vendor-based outsourcing for new product introductions?
A: Our appliances business is largely outsourced, while cookware is mostly in-house. We will continue to use a combination of both approaches to meet demand and drive growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
