Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Monte Carlo Fashions Ltd (BOM:538836, Financial) reported a revenue of INR1,062 crore for FY24, indicating a strong overall performance despite challenges.
- The company added 55 new Exclusive Brand Outlets (EBOs) in FY24, bringing the total number to 411, showcasing its expansion efforts.
- Online sales have picked up significantly, contributing 9% to overall sales, up from 6-7% previously.
- The home textile segment showed promising growth, with an anticipated 15-20% increase in the upcoming financial year.
- Monte Carlo Fashions Ltd (BOM:538836) plans to open 45-50 new EBOs across India in the coming year, indicating continued growth and market penetration.
Negative Points
- The company reported a revenue decline of 13% year-on-year for Q4, with a net loss of INR19 crores, reflecting a challenging quarter.
- EBITDA for FY24 declined by 34% year-on-year, with EBITDA margins dropping to 13.46%, indicating reduced profitability.
- Higher sales returns and increased discounts significantly impacted the company's financial performance.
- Finance costs have tripled over the last two years, raising concerns about cash conversion and overall financial health.
- The company faced challenges with higher inventory levels and delayed winter season, leading to increased discounts and returns, affecting profitability.
Q & A Highlights
Q: Historically, Monte Carlo Fashions had low sales returns, but this year saw a significant increase. What caused this change?
A: The increase in sales returns is due to aggressive expansion into large format stores, online sales, and new EBOs. Additionally, a delayed winter season led to higher discounts and returns. The company is taking steps to address this by focusing on profitability and shutting down unprofitable stores. (Sandeep Jain, Executive Director)
Q: Finance costs have tripled over the last two years. What is the outlook for finance costs going forward?
A: Finance costs increased due to higher inventory and rising interest rates. However, the company expects finance costs to decrease by 100 to 200 basis points as it liquidates old stock and focuses on profitability. (Sandeep Jain, Executive Director)
Q: What is the revenue guidance for the coming years, considering the previous target of INR2000 crores?
A: The company is cautious due to the current economic environment and discretionary spending trends. For FY25, the focus will be on maintaining flat revenue while improving profitability. The target of INR2000 crores remains, but guidance will be revisited in the second quarter. (Sandeep Jain, Executive Director)
Q: Are higher discounts still prevalent in the current market scenario?
A: While the winter season is over, the summer season is seeing flat consumption. Discounts are expected to start next week, impacting Q1 margins. The company aims to improve margins over the year. (Sandeep Jain, Executive Director)
Q: What is the strategy for the home textile and kids segments, given their smaller contribution to overall revenue?
A: Home textiles are expected to grow by 15-20% in FY25, with improved margins. The kids segment faces high competition and lower margins, so the focus will remain on maintaining current revenue levels. (Sandeep Jain, Executive Director)
Q: How are you addressing the issue of unprofitable stores?
A: The company plans to close 4-5 EBOs, 30 SIS, and 40-50 LFS locations due to high discounts and low footfalls. New EBOs will be added to compensate for the loss in sales. (Sandeep Jain, Executive Director)
Q: What is the geographical mix of sales, and are there plans to improve ASP?
A: Approximately 88-89% of sales come from the Northern, Central, and Eastern regions. ASP is expected to increase by 7-8% in FY25 to counteract discounting effects. (Sandeep Jain, Executive Director)
Q: Given the challenges faced this year, are there plans to hire strategic consultants to improve market understanding and strategy?
A: The company acknowledges the need for better planning and has taken corrective actions. While there are no immediate plans to hire consultants, the focus remains on improving profitability and market strategy. (Sandeep Jain, Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
