here is from Carter’s (One of Kitex clients) Q3 Concall managment commentary:
"Our biggest challenge in the quarter was sluggish domestic demand for our fall transitional products in late summer,which caused promotions to be higher than planned. We had good growth in July and September, but saw an unusual decline in demand in August. It was our toughest month in terms of comparable sales and profitability."
If carter has witnessed a small demand problem in this Quarter, because of any reason. then same would have been experienced by other retailers.
Carter total sales in rs. is ~ 6000 Crore at Quarter Level.
While per Quarter Sales to Carter from Kitex would be like 20-25 Crores (Guessing)
If carter does defers one shipment of 10-15 Crore, i guess it will not make a substantial impact on their sales
they are already having 3500 Crores+ in their inventory.
So, a guess could be that maybe this sluggishness experienced by kitex clients in this particular august month could have led to a deferment of order in this quarter.
Now saying that this sluggishness is caused by the elections is … idk… maybe a little subjective.
Not one analyst in the concall mentioned about US elections and sluggishness, if any. neither did the management. Overall the concall transcript is a very good read. tried to put it together in a pdf, sharing link:
I listened to Kitex Q2 con call. There was a question on competitive landscape. The MD said technology-wise, infrastructure-wise, system-wise, efficiency-wise and productivity-wise ( others can update if I missed anything here) no one can compete with Kitex.
Could this be the reason they enjoy high margin?
At this price looks good.
Majority of imports of Infantwear in USA is from China I think around 40pc.
If donald trump goes against china ie more tax etc
then kitex stands to get benefit.
More over heard that there might be tax proposal of 1, 5, 10, 15 pc on various products which is imported. With 97 pc of apparel being imported in USA I guess there is huge chance of KITEX.
Why do you feel Kitex benefits from Trumps presidency ? Trump would opt what is best for his country. China is low cost producer. Unless he makes a trade deal with India, I see no reason why he goes against china. But good to see some process from Kitex.
How kitex can avoid tragedy faced by welspun about originality of cotton they claim as organic? Hope, management shall learned lesson from welspun and kept all documentation and traceability to prove that it is organic cotton. Else, it may loose existing business by loosing concentrated clients focused business.
Any body has information from mgt. On this issue?
China I heard labour cost is on the rise and more expensive than India (reference to conference call transcript of SP Apparel)
Yes, US President will do what he thinks is best for his country. But if u see current market, they import 97 percent in apparel.
cost of labour in textile in USA is $16 per hour, multiply by 8 hours u will get Rs 8700 Per day which is roughly what indian textile players pays per month.
So cost wise it will be very expensive to manufacture in US.
As this being very labour intensive it will be difficult for US companies to manufacture at a competitive price.
Maximum he can put more tax for import goods, lets say he put infantwear under 15 percent tax bracket (worst case scenario) then also how will US companies compete with such high labour cost. I dont think they will do with 15 pc additional tax anyway. 1, 5, 10, 15 pc bracket is what i read somewhere.
Share Price is lower now, Dollar has appreciated and hopefully promoter would have paid all loans as he indicated in q1 conf call that by q3 they will pay all outstanding. But due to demonetisation, operational issues might be there to an extent.
If trump makes a trade deal with India then better.
If he increases tax on Chinese imports, said 45 pc tax or may be lower then that means Indian imports will be competitive compared to China, So Kitex benefits right ?
They have mentioned in the past they are quality conscious and use Global Organic Textile Standard certified inputs. There is high client concentration risk. I remember Jockey used to be high profitable customer.
Gerber Now I think if I remember right is $39 million.
normally they avoid more than $30 million per customer.
I think Lamaze is premium and organic and their private label is in mass segment which may not be organic. Not sure
KITEX issues I think is : Merger with Kitex Childrenwear, Huge Cash which does not earn interest. (heard of capex of 120 cr in 3 years ) and Consistently missing its own guidance.
Issue with management is giving exaggerate guidance about revenue and profit and fail to achieve that. eg. he was claiming huge business going to come from Sams Club - a Walmart subsidiary, but no realization till date. Committing too much and not achieving it dampen investors confidence. Instead they shall give real target and achieve more than guidance instead.
I agree. The labor cost is more (by around 3 times) in China over India. But, due to economies of scale, china is more cost effective. I believe he will not raise import tariff on all Chinese products. However, if imposed on textiles, I believe India bears no exception. I hope US gets out of TPP completely without re-negotiations. TPP withdrawal is a short term speculative boost to KITEX. Considering Donald wants to manufacture stuff in America, not sure of long term impact on KITEX. KITEX quality over Chinese competitors may stand as an advantage.
