Vaibhav Global earnings call highlights for Q3FY23.
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Sales for the quarter were Rs. 724 crores, down by 3.6% from Rs. 750 crores in the third quarter of last year. However, the topline is encouraging over pre-COVID period of Q3 FY20 with a strong growth of 28.5%. This performance is with the backdrop of current moderating consumer demand amidst inflationary environments. In our UK market, many of major delivery partners are facing strikes which had an industry wide impact on deliveries. Further, during the quarter, we faced a cyber-attack which resulted in temporarily disruption to our US and UK businesses. The company has demonstrated resilience in current economic environment as our revenue growth would have been flattish YoY if we negate the impact of cyber-attack and delivery disruption.
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Our gross margins continue to remain strong at 60.6%. Our vertically integrated business model allows product differentiation with lower ASP and helps us maintain market leading gross margins.
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During the quarter, our Germany business continued its growth momentum and is now clocking approx. 1.4 million Euro revenue every month. Other business matrices are also trending positive. Today, we are dispatching more than 3,500 pieces a day. In terms of customer engagement, our CSAT score in Germany is 96%. We are under discussion with other affiliates to gain more households in Germany.
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Our D2C brand- Rachel Galley is performing very well with 200% YoY revenue growth on low base.
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In US, even though inflation is inching downwards, consumer sentiments remain muted.
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We are taking proactive measures to mitigate the impact of these headwinds on our business, including expanding portfolio of under 10 and 20 dollar products, content improvement, expand our TV footprint, digital and OTT promotions, etc.,
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Our vertically integrated supply chain network spanning 30 countries is the backbone of our business and a key differentiator. It is helping us with increased product availability. The low cost manufacturing with value sourcing enables to serve value conscious customers in our addressable markets in US, UK, and Germany, thus achieving industry-leading gross margins.
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Considering current macro indicators, we expect to achieve flattish to 2% topline growth in Q4 and end this fiscal year with negative 3% to negative 2% topline growth. For FY24, we expect to deliver revenue growth in 8% to 10% range with strong operating leverage over current year. However, our mid-term outlook remains intact, and we expect to deliver mid-teens revenue growth in subsequent periods with decent operating leverage.
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Shop LC (US) had a decline of 11.3% in sales which was majorly driven by the weak consumer sentiments and cyber-attack in last quarter. However, with declining inflation rates in US, we hope that it might trigger the consumer sentiments positively and may create new opportunities as the US economy continues to evolve
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In Shop TJC (UK), growth in ‘new tv customer acquisition’ on Freeview TV continued during the quarter reassuring our investment in upgrading our channel position. However, weak consumer sentiment in UK overweighted the growth prospects and hence Q3 revenue have shown a decline of 10.9% YoY. Performance in UK were also partly affected by the cyber-attack & disruption in the delivery market during the quarter.
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59% of new customers being acquired digitally.
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The reach of our TV networks by the end of Q3 FY23 was approximately 129 million TV homes, which is ~2% higher YoY. We have been expanding our customer base by leveraging diverse product portfolio and omnichannel presence. Our unique customer base is at half a million, new registrations on TTM basis are at 3.2 lakh. New customer acquisition on TTM basis stands at 2.4 lakh, which is lower by 1% YoY but significantly higher by 79% over pre-COVID period of Q3 FY20.
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We have more than 250 people within our product development team that constantly comes up with new ideas, new product, and so more-and-more manufacturing is going towards our own units. So, predominantly, jewelry will be manufactured by us and apparel, the ladies fashion garments are manufactured by us. Within Jewelry and Fashion Apparel a very small amount that we buy from outside. We buy like home product or beauty product or accessory, handbags that we buy from outside.
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Customer Acquisition Cost
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On TV, the store for acquiring and selling is same. So it’s very difficult for us, it’s impossible for us to differentiate what is acquisition cost and what is the selling cost. So we don’t look at it that way. How we look at television broadcasting is that within 18 months, the TV cost, the broadcasting cost should be 10% to 12% of our revenue. So, we look at it in 18-month basis.
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On our digital customer acquisition, we try to acquire customers at one-third the lifetime value of that customer. And different channels have different lifetime value. For example, Google, Facebook has about $70 to $100 lifetime value, whereas OTT like Roku or Fire TV or Apple TV, there is about $2,500 lifetime value. So we try to keep our customer acquisition cost at one-third the lifetime value or below one-third the lifetime value.
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our model is that we would source product or even third-party brands to be sourced, but only that will afford our gross margin of 60%. If it is lesser than that, we just don’t entertain that brand. So that in fact would exclude, say, Apple or Samsung or Dell products for us. And we are happy to stay in the space where our brands would, over the years, become more ubiquitous and known and would have developed equity value within the brands.
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other income includes the foreign exchange gain, which is around $800,000. So it’s around Rs. 7 crores to Rs. 8 crores. Apart from that, the other income is mainly will be received through interest or the cashbacks from credit card companies.
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Unaddressed market (approx figures)
US: 10 mn households out of 75mn
UK: fully distributed in 27 mn households
Germany & Austria: 15 mn households -
Germany:
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So if it was not for inflation or current subdued environment, we would have been profitable earlier. But we are still feeling fairly comfortable to become breakeven in H2 of next financial year. For the full year, we won’t be profitable, but we will be breaking even in H2 of next financial year.
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, the current run rate was EUR 1.4 million, about $1.5 million, and the profitability comes at EUR 2.5 million. That is a current state. But now, from next year, we may get more airtime or we may have additional expenses. So we believe that it will need to be around EUR 3 million for it to breakeven at that level of expense. So, this is what we’re expecting in H2 of next year. We’re expecting about EUR 3 million per month net revenue.
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once Germany is successful and profitable and scaling well, we may look at Japan next before coming to India.
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we launch about 100 new products every day.