Thats a very good analysis Sudheendra
Retailing in India is at a cusp of disruption due to market share being fought by online retailers and supermarkets
In most countries people still prefer to go to a local shoe shop to buy shoes. It will be some time before this revenue stream is eroded but revenue from bags, belts and even children shoes will face disruption specially bags sold on the basis of low price.
The company’s profit to cash conversion is splendid. So is their growing eps.
Earlier in the thread someone said the breakeven for franchise shop is turnover of 4-5L a day. Assuming a shop opens at 10am and closed at 10pm with equal distribution of revenue throughout the day, thats 1300-1500 items a day or roughly 2 items a minute. Will a shoe shop have that kind of turnover and how many people would need to show things around, constantly move inventory, attend to customers?
Usually shops are busy towards later part of the day, around evening. Is it possible to have that kind of footfall and turnover ? Please excuse my ignorance. I am trying to make sense of numbers. Thanks
The kind of cash flows this company throws (and the super efficient balance sheet they run), its one rare case. Had the corporate governance issues not been there, the valuations would have been way higher.
If one follows their pages on social media - the company keeps introducing pretty interesting products at very attractive prices.
True. I am using company products for more than 15/20 years. 100% happy using all leather products. Using a leather wallet for more than 6/7 years, chale hi ja raha hai
What I feel they are a bit lazy in store expansion. They have one super big shopping mall type store in Kolkata, thats it. But people don’t mind reaching there.
I think this is a general perception about this company amongst people. If they are very lazy then how has the company grown at 25% CAGR on revenues and much higher on net profits over last 3-4 years? I don’t think they would be getting such growth without doing anything.
Also, though @ashwinidamani has pointed that many of the stores are not in listed company (which has been a major concern) but could it be that all the material is supplied through the listed company? While the retail stores are owned in individual capacity and they also get to capture some profits (to benefit the family or relative running that store)?
Else how are they able to generate so much of sales and consistent growth?
Logically they can’t be doing too high a turnover with about 30 stores and low priced items.
I too use and vouch for the fact that they make good, low priced and durable items. Less number of stores has been an annoyance for me as a consumer, but someone who visits these stores know that they always remain very much crowded. So, in my opinion they are more inclined to increase the per store volume and profitability than having many outlets with low volume of sells (e.g. Bata, Khadims). In my opinion this is the reason they were able to keep the OPM >20% inspite of having items priced in the lower range than Bata.
Having followed this company and its consumers from childhood, I feel that in-spite of them selling low-priced items, which have many competitors, they still sell a lot. Perhaps scarcity bias is at work here. Unless in an emergency, Sreeleathers consumers usually do not buy from Khadim or Bata. Sreeleathers has become a brand in budget segment without much advertising attempt, mostly from word of mouth advertising. This is another reason IMO they have better margin.
They have recently started selling online and so consumers can also buy from there. Unlike many e-commerce shopping portal, sreeleathers online always charge for shipping/each-item irrespective of the total billed amount.
Interesting points. Thanks for sharing your experience. Another interesting things is that they keep expanding the product range…now they even sell Suitcases and travel bag etc and many of them have very nice and modern prints
Can u pls highlight what are the corporate governance issues? Has there been anything unethical practice?
Disc. Customer years back. Passively tracking since ipo. Could not get much information in public domain on management and vision of company etc.
It is surprising that even after major lapses in corporate governance have been discovered , many biased investors are still enamoured by this stock!
The promoter recently purchased stock from the open market and then promptly gave an interview to a newspaper(HE Doesn’t answer any questions even in the AGM) & was giving a bullish commentary.
Stock rallied & BSE asked for a clarification. company replied as under:
The news item published in’,The Hindu Business Line " on 26.12.2018 under the heading’ "Sreeleathers looks to expand its exclusive stores" contains the personal opinion expressed by Mr’Satyabrata Dey, Managing Director of Sreeleathers Ltd. while answering to a particular query made by the concerned news reporter about his vision of
_regarding future business plans of Sreeleathers ltd. We categorically make it clear that it is simply a personal opinion of Mr.Dey expressed in an interview and cannot and should not be regarded as an official statement released to either to SEBI or any any shareholder of the Company as no formal decisions have been taken by the Company in this regard till date. Our Company undertakes to comply all the relevant rules and regulations of SEBI
and or other concerned statutory body, as and when any official announcement will be made , as not only our
Company is a responsible law abiding- corporate body but because of the fact that we are duty bound to protect the
interest of all our shareholders.
This is for your kind information and record. Basically what the Promoter says has no value as per the company itself. HILARIOUS!
Thanks Sujay. Great Pointers, but I feel sales from the online platform would be relatively very less compared to its peers as the typical Sreeleathers users would prefer to come to the store despite the crowd, thus to maintain balances they have to charge the shipping.
Here is a classic case of how promoters can cheat minority shareholders through financial shenanigans and by withholding disclosures/information from investors.
not sure if the awareness of having a store makes big difference or not. Since it is located in the heart of the city and where most of the footwear businesses have their shops, probably the customer footprint and volume of sales make real difference.
Margin improvement has mainly come from reduction in Other Expenses. These expenses were extra ordinarily high in Q1FY20 so there is a bit of base effect. Also it could be an effect of change in Accounting Method of IND AS because of which operating lease has to be shown as on-balance sheet item. Since there is no corresponding increase in Depreciation this looks unlikely.
