I’ve worked in retail apparels as a consultant and it is a thing.
Disc: Invested, biased.
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This, in particular, is very true. Gen Z has extreme peer pressure. So, they prefer Insta and TikTok fashion styles, which change every month. They prefer buying from the current in-trend D2C brand for the month, and then another six months later. This is also true in the West, where Lulu was hip and trendy for 6-7 years and is now down and dusty.
Look at Nike and other legacy shoe makers struggling with rise of Asics and Skechers worldwide. LensKart does better than legacy optical brands despite being much lower in terms of quality of products because styling is trendy and changed monthly.
You really want the legacies to change, they need to have someone aged 30-35 in merchandizing, branding, running D2C ops and store formats. Just look at store experience of someone like Rare Rabbit and Souled Store vs a LP, Raymond, Levis.
Yes they will screw up sometimes but less than regular 30 plus years of experience CXO who do not get what is to be done despite reams of data given to them.
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Some scattered thoughts.
This should ideally be valued for what it is. A mature old company that may still continue to grow at the level of inflation. Despite the decline in revenue I think it is not a declining business yet and death, if any, should be very slow and gradual.
Why I think so?
a. The balance sheet looks healthy and they could still afford to grow the number of stores without much leverage.But then another question is whether they should grow actually.
b. Operating leverage should come to play as the demand recovers, just as it worked in the opposite direction this quarter.
As pointed out by others the intangible assets seems to be valued disproportionate to the cash flow it can generate even in future. The asset turn seems to be below 0.7 which is too low compared to any company that it can be compared with. On the other hand the company is valued below its annual sales, which is low compared to any of its peers, even those occasionally profitable ones.
If it is a slow grower or an old mature company that would grow at inflation level in the long run, what would be the right amount to pay for it?
I was trying to go through the old demerger documents but the names and name changes are so confusing that I gave up. At one place it was valued by KPMG and someone else at Rs 1000-1200 level but I do not know whether what was named as Raymond Lifestyle then includes all the business it now has.
There are odd things that I do not understand. Last quarter the cost of goods was very high vis a vis sales, but it normalised this quarter.
The inventory level between FY 24 and FY 25 looks almost similar even after adding 170 stores. Curious how could this be explained.
I bought a small quantity as a demerger opportunity and found myself losing half of the money.
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Good thread on Raymond Lifestyle
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random notes from Concall
Store expansion will be slower for FY26 and depending upon sales pickup, they will follow a calibrated approach.
Shift to a Franchise led model particularly for Ethnic Wear Segment.
Management referred to some “early signs of recovery” and anticipates 10-15% growth in the coming FY.
When asked about underperformance relative to competitors the management pointed to ransomware attack and poor performance of new stores due to weak demand.
EBOs performing poorly, taking longer (36-40 months) to break even compared to the past (24 months)
Continued focus on premium lifestyle segment, no plans to enter value fashion.
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I would suggest doing some simple scuttlebutt by visiting some Raymond shops. I have observed most of them are empty whenever I passed in front of them in Bengaluru.
I booked loss after last quarter. More than the poor business performance, for me the reason was management not being transparent. In Q2 concall, there was no indication of poor Q3. If at all anything, it was the other way.
Lesson learnt.
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Unfortunately, I passed by an Ethenix store and it was empty too. However we need more than just two observations. But the wedding season is also done. Look at Manyavar stock as a yardstick.
As for guidance and transparency, I am still assessing the management for this. They have ramped up advertising, that does take 30-40 days to take effect.
Disc: Invested, biased. Watching.
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Promoter buying by Raymond in Raymond Lifestyle. 2.4lac shares (0.3% of outstanding) bought within the last one week
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Lol. Are they looking into pledging in near term? Must be so. U need to have stocks to pledge it afterall.
The performance targets are missed, top management resigning, unclear way forward and issues with minority stakeholders, the company has more reasons to be cautious than optimistic.
Disc: Invested. Regrettable investment.
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