Good point, worth checking, However, if we go by historical trend, online sales has been at ~ 5-6% for IT. Increase in other expenses because of online sales would be very surprising if that’s the case. I believe, other expenses have increased either because of new product launches or something else.
One comforting factor is increase in gross margins on qoq as well as yoy basis.
Indian Terrain has put up a Investor Presentation post Q2 earnings on NSE. Putting and summarizing some points below from the presentation alongwith comments if any which are in bold italics.
Standalone Men’s wear grew 25%
• Decent retail offtake with SSG from exclusive outlets at 5% - SSG from exclusive stores looks very tepid
• Brand picked up market share and led the industry growth in departmental stores
• Expanded distribution presence and deeper penetration into markets had big thrust on wholesale business
• Reclaimed partnership enabled strong traction and growth in e-retailing
Steady state of growth from Boyswear with the segment contributing 7% to overall revenues Boy’s wear seems to be doing well
Increase in Costs led by
• Extended EOSS
• Specific branding initiatives for Boyswear and the upcoming launch Footwear
• Increase in Personnel Costs – new Segments of Boyswear/Footwear coupled with strengthening of team effective Q3 FY’16
Increase in finance costs primarily from interest on term loans availed in Mar’16 and increased working capital utilisation
Increased Depreciation with addition of new stores & warehouse coupled with renovation of key stores
Provision for Tax at full rates
Thanks for summarising the ppt hefacebuk. I believe impact of demonetization could be huge on apparel industry in the short term, have come across couple of data points which points towards huge dip (to the extent of 40-60%) in volume sales of apparel, though nothing specific to IT. Declining volumes shall result in reverse operating leverage.
It is commendable that a new category is already 7% of sales. It would be interesting to know by when management expects to achieve break-even in boys as well as shoes vertical.
Branded garments is a business with bad industry economics. I could not find any noteworthy wealth creator except Page. On the other hand we have enough example of wealth destruction. Brands like Benetton are operating for decades without making any profit. Recent shape of many retailing giants like GAP, Aeropastle etc in US market is another example. Few notable non performer in Indian market as on date are Zodiac and Koutons. Go fishing in a pound where there are maximum fishes.
I would not blame the business or the whole sector.
There are other companies as well which created a lot of value for shareholders :-
Kewal kiran
Rupa
Siyaram silk etc
All the three companies you have mentioned have given excellent return since 2013.
This has been true not only for textile but also lot of other sectors as well.
But if you look at long term performance, (peroid of more than 10 years or more), all three has cagr sales growth around 10-12%.
This growth rate itself state the state of sector.
We have companies from pharma and IT which has CAGR of more than 25%.
The steep rise in valuations over the recent years is not sustainable in long run.
Agree 100%.
For every winner, there are 10 failures.
List of failures also includes Provogue, Levis, Lee, Turtle and many others.
Now most of brands are betting on EBO space. They are keen on opening new EBO.
However high real estse rental has made this model difficult to sustain in long run.
Most of rental increases 10% year on year. Against this sales increase hardly 10-12% on average.
Regarding Indian terrain, they appear more as value for money brand against inspirational one like Zara.
How they able to sustain current sales growth will be interesting to see.
Let’s talk about Kewal Kiran
It was somewhere around 250 bucks in 2007…
Its treading at 1700
And gave a total dividend of 197 from 2007
That means you already earned your invested money as dividend. And current dividend is 40+ rs for a year.
I would be happy to invest in a company which shows a sales growth of 15% cagr for past 10 years.
This reference is just for study. As Reverse engineering the winners is one of the way to learn. The point I want to make is instead of focusing on sector as whole, I would prefer looking at company’s individual performance. I know people look for sector headwind and tailwind. But its the individual companies which should be given the priority.Again that’s a personal view
I am not invested in kewal kiran as its not available at favorable valuations. I just studied it to find how it managed one of the best margin in industry with best working capital management.
Moneycontrol has highlighted the stock today
What is the latest SSSG reported by co.? I could only find for a while back
DSP BLACKROCK MUTUAL FUND sells 999,334 shares & MALABAR INDIA FUND LIMITED buys 1000000 shares, both @180.
Anyone has done channel checks here? Q4 suggests huge inventory pileup…
Dhoni appointed brand ambassador
Indian terrain is focusing on smaller towns mostly tier 2-3 cities for growth and also tier - 1.Comoany is planning to double its store count in coming three years. Brand name is also established. Margin is also around 10-11%.
Indian terrain is slow but experienced managemet in running retail store. The price of articles is medium range and they are suitable fit in the budget of middle class n upper middle class. Besides this the quality of apperal is gud and the colours will not fade Near about one and half year. The collection is gud. I hav visited Lucknow central in shataganj tow months back after discount season ends i found very less stock in the Indian terrain section compare to other sections. Their casuals and formal wear both creating gud appeal among men’s. It’s store is mostly in South but now they are focusing on North also.
I have a concern regarding their trade receivables growing at a much faster than their revenue. I asked them this question in the AGM(on 30th Sep) and they replied that the retailers are delaying payments because of the difficult economic environment. Also, the large format stores like LifeStyle and RelianceRetail take more time to pay.
In Q2 presentation also, the trade receivables has gone up significantly. I have a feeling that they may be stuffing the channels to boost revenue.
Having said that, I like the management(having listened to them in the AGMs), they seem smart and capable.
Disclaimer: This is just my personal opinion and not a stock recommendation. I have been owning this stock for few years and holding on with a substantial loss!
In Reliance trend Indian terrain is not available.
I think as rightly mentioned by you, the key monitorable for this stock and next trigger for price movement would be correction in the trade receivable position. Through my discussions, I understand that Indian terrain sells majority of its products to franchisee owners under SOR (sale or return) model unlike some other brand owners who sell under outright sale basis. SOR model is an easy way to boost revenues, but the risk is magnified in case the inventory is non-moving and it gets returned to Indian terrain.
The second risk is the risk of change of two CFO’s within 1 year period. Mrs. Visalakshi has been a regular with the company since 2000 and her exit followed by exit of the next CFO does not give a good vibe.
Thirdly, Q1 of 2021 is likely to be a very bad quarter due to current issue.
So personally, I would be more comfortable taking an exposure after clarity emerges on trade receivable position.
