Campus Activewear - betting on the India Consumption Theme

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I did not know that I’d get so many questions. :sweat_smile:

I don’t follow the buy-and-forget approach, If I find any red flags or degrowth or stocks that seem damn expensive then I’ll exit or book some profit. I know I might lose some good stocks but that is better than a big loss.

I invested in it for 5-6 months. I could have averaged it but there is something that I follow, cut your losses/losers early. Investing in stocks is a probability game, now this stock has become too risky for me to hold after declaring results + red flags and if it goes to even 150 I won’t be surprised.

Better means, they might earn some profit but that profit amount may not be enough to justify this PE. For example, their current profit was ~0 Cr, any number here will be better than zero, 2cr, 5cr, and so on will be better than zero.

As per my understanding, when a stock trades at a high PE it means their earning growth is expected to be good. If you don’t see any earning growth then there is no point in paying for this high PE. This type of stock usually keeps hitting a 52-week low.

I’m not against this stock, it’s just that it seems expensive to me at the moment as per its earning growth. I might even re-enter this stock if it goes to reasonable PE as per the earning growth. Please don’t ask what should be the reasonable PE according to me.

I have better stocks in my tracklist to invest in than waiting for this stock to bounce back which may not happen. Please don’t ask about my tracking list.

Note: I might be wrong here, it’s just that I don’t take too much risk.

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Campus Activewear has reported its financial performance for the second quarter (Q2) and first half (H1) of the fiscal year 2023-24 (FY24):

Financial Performance for Q2 FY24:

  • Revenue from Operations: Campus Activewear recorded revenue of INR 258.7 Crores in Q2 FY24. This figure reflects a decline compared to INR 333.2 Crores in Q2 FY23. The drop in revenue was attributed to subdued consumer sentiments and a challenging macroeconomic environment.
  • Sales Volume: The company sold 3.9 million pairs of footwear in Q2 FY24.
  • Average Selling Price (ASP): The Average Selling Price for Campus Activewear’s products was INR 658 in Q2 FY24, up from INR 608 in Q2 FY23.
  • EBITDA: EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter reached INR 24.9 Crores, with an EBITDA margin of 9.6%.

Financial Performance for H1 FY24:

  • Revenue from Operations: The first half of FY24 (H1) generated INR 612.4 Crores in revenue from operations.
  • Sales Volume: Campus Activewear sold 9.6 million pairs of footwear in H1 FY24.
  • Average Selling Price (ASP): The Average Selling Price for their products was INR 641 in H1 FY24, compared to INR 606 in H1 FY23.
  • EBITDA: EBITDA for H1 FY24 reached INR 91.3 Crores, with an EBITDA margin of 14.9%.
  • Profit After Tax (PAT): The company reported a PAT of INR 31.8 Crores in H1 FY24, with a PAT margin of 5.2%.

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The CEO has acknowledged the subdued performance during the quarter, which was influenced by reduced sales volumes due to a challenging macroeconomic environment and channel inventory correction. He also outlined the company’s strategic focus for the future:

  • Strengthening Business Objectives: The company aims to continue driving its long-term business objectives and enhance execution strategies, with a particular focus on key geographies in North and Central India.
  • Expansion Plans: Campus Activewear intends to make further inroads into key Western and Southern states in India.
  • Product Innovation: During the quarter, the company launched Campus ‘Air Turbo,’ designed for the Indian market and featuring thermal management technology to enhance the overall footwear experience.
  • Brand Positioning: Campus Activewear continues to strengthen its brand positioning, engage with its target audience, and connect with consumers through innovative 360-degree marketing strategies.
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More Insider Trading

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Results are horrific, stock is down and out; however during my morning walk I see reasonable number of people wearing campus. Difficult to see proper logo while walking, I can say 10 to 15%. Have anyone else checked???

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I was thinking of taking a position but then stopped. The way I looked at it was by looking at sales rank on Amazon and verified reviews by customers. I didn’t see any product in the top 10 sales rank in its category and did not see great reviews.

Not invested and biased

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When I go to any footwear shop, I don’t see any brand differentiation. I trust only Bata (maybe since I used it from childhood). Hence I don’t see any pricing power for companies in this sector. Also too expensive for me from valuation point of view

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Is Bata an Indian brand??
Isn’t bata a Swiss brand??

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Going by this logic there is only one brand that shows up with international brands on Myntra and Flipkart which is Redtape.

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Its a Czech brand established more than 100 years ago

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Implementation of BIS compliance from 1st Jan 2024 can be a game changer for Indian footwear manufacturers

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Requesting senior boarders to help me understand what is Management trying to explain here as reason for degrowth and how/why didn’t it impact other peers?

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Attained concall, recalling from that memory,
o2o is online to offline. Many retailer purchases campus products from U and A. This 2 company consolidated (Some layoff also happened) their businesses and exit platform business of o2o.

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Absolutely Agree with you results were quite bad last quarter. I hope they perform this quarter much better. And I Do See Almost Everyday people wearing campus shoes. in gyms, gardens and i have gone out to ask people about the product and have received positive reviews from many. Although i still also know that most of the people still do not know about the brand.

Disc: Invested

Note: This is not a buy/sell recommendation.

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Q3 fy 24 concall Note

Volume muted?
A: demand like entry segment is muted for all
Premium segment grew.

If premium grew, why it’s not reflecting in margin?
A: Is due to performance marketing and ad spends

Entry level is 20% now, earlier it was 35-36%.
Premium 45% now.

10% marketing is spend vs 5-7% in normal year. Spend level will be 6-6.5% in future.

Online is fattish, b to c ok. O 2 O takes time.

Other player doing margin 20% we are in 12%?
A: Increase in ad spend is the reason, that will normal soon
We have to spend extra to generate demand

Higher premium doesn’t necessary high margin.

Margin came down to 12 from 20-21. No guidance. But we are trying. Reduction on inventory days greatly

BIS: will restrict cheap import from china and Vietnam
Implemented from 1/1/2024
Local manufacturer will be benefited
Campus is the recipient of first BIS certificate. 100% compliant.

EBITDA margin long term long-term is aspiration is 20%.
Accenture is consulting partner

Online margin is higher than trade margin historically but situation is not stable.
Not major delta across the channel in future as we are putting efforts in performance marketing

Online was 38% last year.

Volume is flat but increase in other expenses?
A: Leasing, one of inventory, inflation and employee cost.

Current is tuff year for industries.

100 / year EBO is run rate and it will be continue same run rate.

Disc: Invested

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Thanks deven for brief concall summary. In the concall one analyst gave experience about him visiting the franchise store and the store display was not proper. Company says in concall that they are spending on advertising and brand building but if you visit a store and do not see the upkeep it doesnt give a good picture.

I dont see brand visibility much even if management says they are spending on advertising and brand building.

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The Ken’s story today is about Campus.

It’s a paywalled story. But here are the main four talking points:

  • With its cheap, trendy sneakers, Campus Activewear pipped Puma as India’s top athleisure-footwear brand in FY21
  • It went public in May 2022 and doubled in value, to US$2.2 billion, in five months
  • But its market cap has since slid to under US$890 million, thanks to slowing demand for its shoes and problems with e-commerce platforms like Udaan
  • Campus’ biggest challenge, though, is rising competition, particularly from Abros, which is run by a former COO of Campus

Here’s the link to the full story: Campus shoes beat Puma and wowed investors. Then came the troubles - The Ken

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Further to your observations Mathew10, Asian is advertising on TV at a very high decibel clearly demonstrating the increasing competitive intensity in the industry. The loss of B2B (Udaan and Ajio) has cost Campus dearly. Maybe it stopped focusing on the offline distribution network after tasting success on the ECom platforms.

As a brand / product, Campus has a distinct hold in the marketplace.
The promoter has skin in the game (significant shareholding) and they lead from the front.
Promoter has created 2 hugely successful brands in the industry “Action” and then “Campus” demonstrating their ability.
Everyone jacks up the numbers for IPO… we all have seen it time and again… they also seem to have done the same…
As the industry turns and its stock price falls (200 odd levels may happen) the investment case for Campus should again become strong

invested…

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The company has announced FY24 Qtr 4 results. Op Margin improved in this Qtr - has it turned for the better? Sales has been Flattish but to give credit not falling either. WC released money but its sustainability is suspect as the debtors have dropped significantly and creditor days have risen. Debt has dropped as a consequence.
Sales started improving from Q3 onwards, EBITDA has improved from Q4 onwards. Good chance that the problems are behind. Now as economy improves the growth will return
Employee Cost Increased and Other Exp reduced-HOW?
SBI MF bot from QRG (Havells) and SocGen from Marshall Wace? @ 234

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Q1FY25 Concall Summary

Business Updates

  • Volume growth was 3% yoy in Q1FY25
  • The mix of footwear has shifted to an extent towards open footwear due to the warmer temperatures
  • The ASP stood at Rs 585 in Q1 driven by higher saliency in open footwear

Participants

Vallum Capital

Ambit Capital

Kotak Securities

Motila Oswal

Philip Capital

White pine Investment

QnA

  • For MBO in distribution there have been consecutive quarters of volume growth. In online the market place segment has grown by 20% plus. The retail channel in offline EBO’s have seen growth of 8% yoy
  • The D2C online segment is showing a degrowth of 5% because apart from marketplace other segments have de grown
  • The strategy remains to keep expanding on the touch points. The overall ASP’s have dropped due to much higher share of open footwear category and this is seasonal
  • The ASP should not go up in a meaningful manner in FY25
  • The whole sports and athleisure category is the fastest growing segment and the anticipation is that there should be double digit growth in this segment in FY25 as well
  • The company currently holds inventory of 60-80 days in the distribution channel and that is largely in line with earlier trends
  • The higher employee costs is due to higher headcount in front line staff at distribution centers and stores
  • The ratio of franchisee stores to company owned at 70:30 shall be maintained going forward
  • There are markets in South India and West India that is being actively pursued in terms of new store openings
  • The imports from China are largely curtailed and there has been a positive impact with the BIS norms coming in place and it is just a matter of the inventory in stock getting liquidated by this season as the deadline is June 2025 for non BIS
  • The companies with turnover of Rs 50 crores do not fall in the BIS guidelines but the endeavor of the government is to keep everyone under the bracket
  • Open footwear is a seasonal category selling mostly in Q1 and this will be a strategic category going forward with much better efforts from next year onwards
  • The discounting from private smaller players is quite high and a lot of this is also from the liquidation of non BIS inventory
  • The portfolio of sneakers have grown by 120% yoy and this is one of the key areas in terms of growth levers for the company along with women’s and kids category
  • LFS is a fast growing channel but since it is a nascent contributor to the total revenue it is a complete white space and the idea is to keep adding strong partners on board
  • In terms of apparels it is a big category and will take some time before which the management will think of entering. As of now only focused on accessories
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Government in todays budget announced a focused scheme on footwear sector.To promote exports and generate 22 lakh direct empolyment.Campus rose 14% in todays session.Closed at 7% gain.Pls add on to my view if any.

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