Mirza International - consistent performer but undervalues at present?


(marunachalam11) #145

REDTAPE is already famous for premium formal leather shoes. First global brand from India. Now they have diversified into different segments such as sports shoes and footwear for women’s etc…they are selling their products through almost all major online portals such as Amazon, Paytm mall, Flipkart, Myntra, Jabong, Snapdeal, AJIO, Tatacliq, and they are selling through both online and offline formats in the stores such as Shoppers stop, Lifestyle, Metroshoes. So far, they were concentrating only on exports which declined due to BREXIT and all. so slowly they are expanding their domestic presence with new range of products. these new products may do well globally who knows, in the upcoming years exports may also grow.
Mr. Shuja Mirza who is responsible for domestic market who has completed his degree from California. so obviously he could have visited many stores/outlets in USA. whatever he learnt over there with respect to retail business, store outlook etc… is applied here. As they started sports shoes with brand name "REDTAPE now+ (Athleisure range) it needs time for people to get to know about it. that’s the reason why they are selling with hefty discounts to compete with global brands such as Nike, Adidas, Reebok, Puma, Asics. so when you have to compete with the global brands, you have to sell it at affordable cost with quality, so that one can try and if the quality is at par with the global brands mentioned above, then obviously they will win the race slowly by capturing market share and when the demand increases they will reduce the discounts and no discount on new arrivals etc… This is the mantra being followed in any retail segments (Footwear & appeals).

one of my friend bought Athleisure sports shoes(black) and he is using it for the past 3+ months and he is happy with that, very soft and light weight at par with the global brands that what the feedback i got from him. Younger generation people those who are major customers for the sports shoes. if the quality is good, no doubt people will go for it. i think from March 2018 they started serving Women’s as well which is a huge market globally. men used to have few pair of sandals or shoes where as women used to have more pair of sandals/shoes comparatively. nowadays people become so conscious about their health/fitness. so to be fit by going to GYM, Walk, Yoga, Aerobics etc… 5 to 10 years back that was not the case, right? nowadays i see age old people (mothers/grandmothers) also started wearing sports shoes and walking in the morning which is a good sign. even i am thinking of getting a pair of buying a pair of sports shoes for my mom. I didn’t mean that everybody will buy REDTAPE, as they are expanding in domestic, people will give a second thought of buying their shoes as the feedback/reviews are good and available at affordable cost.

Why do they need retail stores? as they are coming up in new segments/products for Men’s & Women, they want the people to visit their stores and get a feel of the product. i would say this as a marketing strategy. unless your brand become popular, your brand gets recognized, you need retail store to exhibit your products and make the consumers understand and feel it. This can happen only in their own retail stores. Even in metro shoes they have Redtape brand as well. but they may not advertise the same way you do for your product. because as they have so many brands, where ever they get margin, they will advertise those brands only. so, my point is to create awareness among people they need retail stores. Even now many people including me before buying a sandals/shoes we go to that exclusive show rooms and check the model/size whether it fits perfectly. then i will order the same through online as online portals offer hefty discounts.

Initially they may not be making huge profit as they are spending on opening new stores. over a period, say after 2 years or so the brand REDTAPE will be one among the global brands in sports shoes section. with the assumption that the quality is good and at par with other global brands. That time they will reduce the discounts and they may close loss making stores as the brand become popular. Eventually the major sales will be through exports/online.
I do read that from many other posts, reports that the this is family run business and they do have some private companies, and they draw huge money as salaries and charge hefty commissions for bank guarantees etc. Again, retail expansion is not so easy, and they may lose some money. but once you build a brand which will pay for you later years (after 2 to 3 years)
I am still in my learning curve, if anything wrong with my views please feel free to point it out. Please provide your feedback which will motivate us to study and share our views on businesses

Retail store details:
No State No of stores(july18)
1 Assam 1
2 Bihar 2
3 Chattisgarh 2
4 Delhi 30
5 Haryana 17
6 Jammu & Kashmir 2
7 Jharkhand 3
8 Karnataka 6
9 Kerala 1
10 Madhya Pradesh 6
11 Maharashtra 12
12 Manipur 1
13 Punjab 24
14 Rajasthan 9
15 telangana 3
16 Utterpradesh 12
17 Uttarakhand 6
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Total as on July2018 137
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Note: Even though all the story looks good, still i am keeping it in my watch list. may add position slowly on dips. This is not an investment advice, please consult with your financial advisor or research analyst before you buy.


(Prash) #146

Yesterday I wanted to go to kitex agm, but couldn’t make it due to some personal commitments. But the day had some pleasant surprise for me - I accidentally found one redtape online store enroute my trip to daughter’s dance class(I am in Kochi ).

Note : my memories of redtape brand dates back to mid teens (20 years ago ) !
IMG_20180728_180751|690x387

!

My observations:

Location of the store is not an upmarket place but not too far (approx 2-3 kms)from the most happening place. It will catch eyeballs for sure. But not much signboard about the deep discounts in the store (almost all items are 50-60 % discounted) . Limited car parking space and this of course is like any other store on the high streets.

Content and Presentation : Store is not too big , may be of 1000-1500 sq ft range. Everything was neat and tidy and look and feel is excellent.
The store was not much crowded ( 5- 6 other shoppers). Employees were more in number I guess.
They had shoes and sandals for men, women and apparels(t shirt, jeans , trousers and shirts ) for men.

According sales representative sales are good(could be generic comment hence avoidable). It is a company owned store.

Had a chat with asst manager of the store. :

  1. Store opened a month back
  2. Has a target of 25 lakh on first month which they ll easily cover.
  3. Usual weekday sales of 80k to 1 lakh
  4. Weeked sales are 1.25 to 1.50lakhs
  5. All sales guys are redtape employees. (10+)
  6. Planning more stores in Kerala and their dgm is in town.

Forgot to check average salary of employees so that we could estimate rough employee cost / store .

Questions that come to mind are :

  1. Is there a product differntiation between online stores and other formats ? i.e. does the company ever sells at m.r.p ?
  2. Does these online stores sell liquidation inventory or the regular inventory ?

Usually retail fashion businesses have different format of stores

  • concept store ( where all new stuff are sold and those are in marquee locatios)
  • factory outlets ( slow moving inventory are liquidated here. Size is not huge )
  • warehouse store ( very big in size . Running deep discounts. )

To me Redtape online store looks a mix of second and third .

When thinking about deep discounted fashion One story which comes into my mind is Koutons. Koutons had inflated m.r.p. which were sold for deep discounts (50%+ 40% etc). They had 1000+ EBOs across the country. Deep discounting worked for them for quite a few years. But the point to be noted is they didn’t have the brand pull. Customers were pulled to the store only due to the deep discounting strategy.

So my concern is whether Redtape will end up another deep discounter ruining the current brand identity if they do not have product differentiation across the store formats ? Since they are doing expansion via company owned outlet route it is very important to keep a tab on inventory and costs per showroom.

Regards,
Prasobh


(AvinashMb) #147

Thanks for your observations. I think RedTape is simply following the playbook of Reebook and Nike where the prices are high and the discounts for last years models is always there. If you see these brands they are always on discount on online stores like Myntra.

The question is if the products are good enough for it to sustain. Have checked with a few users and many are saying it is value for money because it is most likely a design rip off with good quality.


(ashish agarwal) #148

The products are really good I have one of their boots bought back in 2011 from karnal. The quality of the boot is so good and I wore it near about 6 years and even after that it is in good quality. After that I have to get rid of them gave it to one of my servant. Last year I bought pair of shoes from lucknow central during August month at 2000/-(in discount original price 4000/-). They are light weight and having good quality. The same design of u buy from any other brand like vanhusen etc u ill get neat about 3000-3500 after discount(I have checked in the central same time) . These pairs are very much comfortable u can easily wear it 10-12 hours a day without any pain.


(ashish agarwal) #149

I think all time giving discount will hamper some things.:
1-margins of the company.
2-it will create an image of cheap brand in the eye of youngsters as after all they are the targetted customers.
Regards
Ashish Agarwal


(manivannan.g) #150

Not really, if you take a look at Myntra/Flipkart, in Puma, Adidas, Nike and Rebook, you see a banner with xy% discount at any point of time, but that may not be applicable for new launches. Also, those brands won’t give 50% and above for all the products.


(Ayush Mittal) #151

Again a full page ad in Lucknow times today

Probably given the aggression, we need to see the balance between growth and profitability. Such spends may hit profitability in the short term (they had spend about 18 Cr for advertising in FY18).
We also need to consider the effect on brand power given consistent deep discounts?


(AvinashMb) #152

Thanks for this. Am seeing that they are also aggressive on the Online platforms in terms of discounts. My sense is that they need to have a clear policy that discounts will be applicable only to old stock. This is the approach which Nike/Reebok are following. In case of Red Tape I am seeing that the whole range is discounted always online. This is the same in the online-offline store. This may not be sustainable.

Need to see how much growth they are able to see on the back of this aggressive promotions.
Any idea when the results are ? I think we need a close watch on this as they may get overboard to get growth.


(Marathondreams) #153

Results are on 7th Aug as per moneycontrol…

You are right about impact on brand’s credibility… discounts are good to draw customers towards their stores/brand but it can hurt them on longer term. So balance is the key. Lets wait and watch

Disc- taken small tracking position


(tyrion lannister) #154

Mirza International - Company Update - Centrum 06082018.pdf (1.1 MB)


(Dinesh Sairam) #156

https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Mirza_International_Limited_August_06_2018_RR.html

Mirza got a rating update for additional Working Capital loans. The capital intensity of the retail segment is starting to show. Short term loans have increased by about 15%, although the Credit Quality has been reaffirmed.

The results today should reveal how the venture has turned out.


(Rohit8546) #157

Looks decent sets of no…experts view needed.


(Marathondreams) #158

Sales went up by 4% but PBT reduced by 10% mainly due to 23% jump in finance cost. Segment wise breakup shows increase in domestic sales by 39% whereas exports sales drop by 17%. Severe drop n margins for domestic sales from 25% to 20% whereas improved margins in exports from 15% to 17%.

So focus on domestic sales, additional debt, increasing employee expenses, heavy discounts offered in domestic business thereby increasing sales… all getting reflected in the numbers.


(stockhunter) #159

Shared by a friend , -


(siyaram7) #160

Rightsly said! As reflected in numbers…Branded sales up 40% but profit for the same increased by only 10% at the cost of advertising, infact, it could well dampen the Brand image with these never ending discount SALE. Another PROVOGUE in the making?


(Shyam) #161

Possible to tell the source of the analysis? That’s a good detail of related party activities.


(stockhunter) #162

Not sure of the original source but the comments are glaring and hits the floor, the data is available free on their AR.


(parkhi_nazar) #163

@shyamdsundar The page is obviously right off the AR. I think the analysis was originally by @Leading_Nowhere (from his Twitter handle; I am assuming the leading_nowhere of Valuepickr is the same person)


(parkhi_nazar) #164

And @shyamdsundar and @stockhunter: The tweet with that analysis is nearly 1 year old by the way.


(stockhunter) #165

Thanks to whoever that is, for having done that let the credit go to the guy who did it, and leading us to better informed decisions.