Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VIP Industries Ltd (BOM:507880, Financial) successfully reduced its inventory by INR 174 crores over the past six months.
- The company gained market share, increasing from 36% to 40% among the three organized players.
- E-commerce sales showed robust growth, with a 54% increase in the quarter.
- The premiumization strategy, particularly with the Carlton brand, is yielding positive results.
- The Bangladesh factory is now fully operational and expected to contribute to profits from Q3 onwards.
Negative Points
- Overall revenue growth was muted due to aggressive pricing by e-commerce platforms during major sales events.
- Gross margins were under pressure, with a year-on-year dip of 1,000 basis points due to brand and channel mix.
- High inventory levels led to increased warehousing costs, impacting profitability.
- The international business faced challenges due to underperformance in key Asian and GCC markets.
- The company is dealing with slow-moving inventory, particularly in the soft luggage segment, affecting margins.
Q & A Highlights
Q: How does VIP Industries plan to balance market share gains with profitability, given the current shrinkage in margins?
A: Neetu Kashiramka, Managing Director, explained that the company had to sell at lower prices due to excess inventory, but this is not a long-term strategy. The focus will shift towards the VIP brand, which has higher margins compared to Aristocrat, especially in offline channels.
Q: What is the impact of aggressive online pricing on offline sales, and how does VIP Industries plan to address this channel conflict?
A: Neetu Kashiramka noted that aggressive pricing is driven by online portals, not the company. VIP Industries plans to offer additional warranties for offline purchases and maintain a minimum online price for premium brands like VIP and Sky Bag to reduce conflict.
Q: Can you provide an update on inventory liquidation and its impact on financials?
A: Manish Desai, CFO, stated that the company reduced inventory by INR 50 crores in Q2 and aims to normalize inventory levels within one more quarter. The current slow-moving inventory is valued at approximately INR 180 crores.
Q: What are the expected gross and EBITDA margins for the upcoming quarters?
A: Neetu Kashiramka mentioned that the gross margin is expected to reach 50% by Q4, while Manish Desai projected an EBITDA margin of 12% for the same period, driven by improved realizations and cost optimizations.
Q: How is the company addressing competitive pressures and ensuring profitable growth in the long term?
A: Neetu Kashiramka emphasized that the focus is on reducing inventory to manageable levels and then prioritizing profitability over market share. The strategy includes increasing the premium portfolio share and leveraging cost-saving initiatives from their ongoing project with BCG.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
