Assuming that Q4 is a repeat of Q3, still would seem like a great return on capital of 30% by the branded footwear business. In fact, even if stable state EBIT for the branded business is permanently at 10% RoCE would still remain at 25%.
Relaxo faced similar issues in FY11 - EBIT declined to 8% and RoCE declined to 18% due to a huge expansion, but next year margins rebounded.
Unless things are going to get much worse in the coming quarters, the kind of price punishment Mirza has seen seems unwarranted.
I have been tracking Mirza for a while. Even tried buying their sports shoes onlineā¦but their products somehow didnāt appeal and also difficult to search them on Amazon. On the contrary my last 2 buys have been Puma. They seem to have figured out to fill the space between cheap/average and high end nike/Adidas.
Maybe mirza can pick up a leaf or two from Puma success. Just to be fair to Mirzaā¦Puma is a existing largely successful international brand.
To further addā¦I have seen rapid upsurge in running/jogging culture in last 3-4 years (Mumbai and pune). The marathon events and participants are increasing every year. Further there is increased health consciousness among people these days.
Mirza has had a good opportunity to be a solid desi sportswear brandā¦they need to hire an upcoming athlete/sports person to push their brand. All this is lackingā¦they just seem to be obsessed with low margin exports and tannery.
Iāve learnt from a colleague in logistics that Puma has had their warehouse systems upgrade and they had issues in implementation ultimately leading to major inventory buildup and heavy discounts are as a result of it. Itās not difficult for these brands to grow revenue in India. Profitability is different ball game altogether.
Again not to say that theyāre doing too bad. Adidas, Puma & Nike have been close in terms of their revenue in India over last few years. (+/- 10%) of each other with Adidas leading the pack.
On this discussion, I believe Mirza is actually trying to emulate the model of these top brands, which it can actually look to avoid. Opening own doors is a high capital business model given the crazy rental yields for commercial real-estate in India. In fact one of the top brands actually closed lot of smaller doors in India few years back, only to open significantly bigger ones to have the right consumer experience in the marketplace, but thatās a decent strategy because of the brand positioning of these top brands. On the other hand, It makes sense for Mirza to capitalise on e-commerce, even at the sake of margins. All the top brands have to discount heavily in India, thatās the nature of our consumer. Where these brands succeed, is the product innovation and brand positioning.
Mirza needs to make a decision, do they want to spend by investing in brand (and that would mean more owned doors, more focus on consistency and experience) or they focus on extreme operational efficiency and grow slowly steadily. Both has its pros and cons but not choosing one over other might have worse repercussions.
Looks like another wave of Inventories being sold at low Margins. Mirza has built a good brand, but theyāre struggling to get out of the destructive discount cycle.
Disc: Iāve gotten out of my entire position in Mirza 2 weeks or so back. My investment thesis circled around their legacy business contributing most of the value, while the Retail venture being an optionality. It looks like my judgement was wrong. More resources are being committed to the Retail business than I am comfortable with. I still think the company holds promise. But Iāll look at it again when the management is able to steer the company better.
Few months ago I bought a pair of shoes from their store, since I was also invested, at 60% discount. In my experience the pair was not even worth the price I paid even after discount. It looks like they are offering steep discounts but in my experience they are still getting way more than the actual worth of the shoes. I also bought a shirt, which I love a lot and although it was available at 50% discount but at the same time it was actually the fair value. Have seen similar linen shirts from other brands in similar price range. So I look at the their discounts more as a marketing gimmick to lure discount savvy people to buy their products
Looks like management has taken price hike with lowest priced shoes above Rs 1500 even after the usual 70% deep discount which earlier use to be Rs 1100-1200
Classic case of āBird in the hand is worth two in the bushā. The brand still holds a lot of promise if the management could just focus all their energy in furthering plans in the footwear segment. But they are very adamant about making it in retail, a sector thatās completely new to them and to top it off, already has silly amounts of competition.
Godspeed to the management of Mirza International.
In my view, and many on this thread may not agree, Mirza qualifies under the āmistake stockā list. Stock pundits are getting ready to appear on TV to talk about a small/mid cap rally. This can be used to lighten up on such āmistake stocksā.
It was good to see a positive undertone from the management. However, given the way things have un-folded, I have concerns on their balance sheet. Would like the company to be more transparent and address the corporate governance issues.
I find the growth commendable in domestic business.
This rapid growth with too many SKU can always create some roadblocks once in a while.
Since the management said 60% + of Inventory is < 6 months old, I would take it at face value but instead of getting convinced, would wait for few quarters to see how it is managed and stabilized. at a level of 3 - 4 months sales .
I am not really concerned about this Guarantee commission, I guess, if not in one form, management can take it in other form, which may be less transparent. And anyway, market has already penalized the company for this CG lapse. We have to live with what we get. We can decide our investment thesis after taking this factor into consideration ā¦
At this price seems downside is limited but market would take quite a while to re look into the stock IMHO
9023fa92-cf93-4d6c-9176-a6611028e92c.pdf (880.1 KB) sales has increased but expenses are raised . Need to wait for another quarter how they manage with expenses .
I missed attending the quarterly conference call on 30th Aug 2019 - on the Q1 FY20 results. I couldnāt find a recording on Stockadda as well (hoping they might do a delayed upload).
If any of you attended this call, would you be kind enough to share highlights please?
Q1fy20 call:
Margin have gone down because of recession.
5 new open stores, they have 200 stores overall.
Interest cost have increased.
They have taken export orders at lower margin to run factories and cut down losses.
US export order (in last call) was just a hogwash, all the orders are going to Vietnam/Bangladesh etc not to India.
They are going down Franchise model now
Promoter in last concall was saying that they will have extra-ordinary quarter but now they are saying recession hit them in last 3 months. Very hard for me to believe that they didnāt know on June 14 that its a slowdown. They are not walking the talk.
