Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arvind Fashions Ltd (BOM:542484, Financial) achieved its highest sales and EBITDA despite a muted demand environment, with sales growing by 8.5% and EBITDA by 18%.
- The company reported a healthy 4.6% like-to-like growth in its retail channel and around 20% growth in the online channel.
- Arvind Fashions Ltd (BOM:542484) focused on profitable growth, resulting in improved balance sheet and cash flow metrics, with inventory turns improving to more than four times.
- Significant investments in brand marketing and advertising led to new customer acquisition and market share gains.
- The company increased its retail square footage by 81,000 square feet in H1, adding 56 new stores, and plans to continue expanding its footprint by 15% annually.
Negative Points
- The wholesale channel experienced tepid growth, attributed to muted market conditions and pruning of low-margin distribution points.
- Despite improvements in channel margins, the gross margin remained flat at 50.4% due to a change in channel mix, with a higher share of lower-margin online B2B sales.
- The company faced challenges in maintaining profitability for certain brands, such as Arrow and Flying Machine, which are currently at lower profit trajectories.
- There was a slight increase in receivables due to higher billing in the wholesale channel during the festive season.
- The company is still in the early stages of investment and growth for its Flying Machine brand, requiring further efforts to enhance its market position and profitability.
Q & A Highlights
Q: Can you clarify the performance of Tommy Hilfiger and Calvin Klein, given the flat non-controlling interest profits?
A: Kulin Lalbhai, Non-Executive Vice Chairman, explained that the strong performance of Tommy Hilfiger and Calvin Klein was offset by increased advertising investments in Flying Machine, which affected the non-controlling interest profits.
Q: How should we view the wholesale business performance for the full year, considering the pruning of low-margin distribution points?
A: Kulin Lalbhai stated that the focus is on direct channels like retail and online, which are growing faster. The wholesale channel has been flat due to market conditions and strategic pruning, but the emphasis remains on profitable growth.
Q: Are there any changes in the retail expansion plans given the subdued market demand?
A: Kulin Lalbhai confirmed that there are no changes to the expansion plans. The company remains committed to a 15% annual increase in retail square footage, supported by strong growth drivers and market opportunities.
Q: What are the key reasons for focusing on direct channels over wholesale?
A: Ankit Arora, Head of Investor Relations, highlighted that direct channels allow better inventory control, improved sell-through rates, and faster cash conversion cycles, leading to higher return on capital employed (ROCE).
Q: How is the company enhancing the online consumer experience?
A: Ankit Arora detailed that significant investments have been made in digital infrastructure, including marketplace models and analytics, to improve the online shopping experience and maintain market leadership.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
