I’m not disheartened with latest no…management I think doing the best they can…sometimes market dynamics tests even big businesses patience…titan I remember has also gone trough long hiatus in its stellar journey…what matter me is just management with leading brand where consumers are upwardly mobile…not many consumer businesses are available having gross margin of around 67%…hope south India campaign with Ram Charan brand ambassador works out…my logic is simple…remain with leading brand in every sector…
disc. invested,vested, 3% portfolio.
Comments are encouraging, but I would like to add a point-of-investment thesis on my end. The bet is on the premiurization and management strength and, of course, the liquidity available at the free float. They are doing great business in their niche area, with increasing foot traffic and the expansion of stores. They operate on a franchise model, which is asset-light, and of course margins have not changed with the addition of so many new outlets. The crux of margin impact can only be seen in the EBO’s, but with Twamev stores, the asp ticket is about in the range of 30k to 40k, and selling the goods of 10-15qty itself is sufficient to overcome the expenses of individual stores, and the rest would lead to profits. I have visited Twamev EBOs in Hyderabad. The collection is extremely good, and the price point starts at 30K+. The area in which they operate this store is elite. Of course, the footfall may be less for Twamev, but the sales average is close to Manyavar even with the lower volumes. In otherhand, in terms of age of population, India is a nation with a higher number of youngsters who are unmarried. The mantra is simple, an increase in per capita will lead to an organized market, and when this happens, it is a win-win for Vedanta fashions and shareholders.
The derating story continues, I believe the next leg of rerating for consumer companies will only come from Volume growth as the market now understands that lucrative story eventually doesnt always translate into numbers
Concall Notes - May
Retail Network Expansion:
- Added 62,000 sq. ft. of net retail area in Q4.
- Launched first EBO of Mohey brand in Bengaluru.
- Expanded retail footprint by 2.34 lakh sq. ft. in FY24.
- National EBO footprint: 660 stores in 255 cities.
Marketing Campaigns:
- Collaborated with Mega Star Ram Charan and Bollywood actress Kiara Advani.
- Partnered with celebrity stylist Tanya Ghavri for a campaign on #DreamDulhanLook.
- Launched campaigns on various festivals across India.
Financial Performance (Q4FY24):
- Revenue from operations: INR363 crores, 6.3% growth YoY.
- EBITDA margins: 49%, EBITDA at INR178 crores.
- PAT margin: 31.9%, profit after tax INR116 crores.
- Customer sales: INR511 crores, 5.9% growth YoY.
Financial Performance (FY24):
- Revenue from operations: INR1,368 crores.
- EBITDA margins: 48.6%, EBITDA at INR664 crores.
- PAT margin: 30.3%, profit after tax INR414 crores.
- Strong cash conversion ratio of 81.4%.
Challenges Faced:
- Impact of significantly lower weddings and muted consumer sentiments in FY24.
- Lower demand due to weaker sentiment and higher base effect post-COVID.
- Receivables increased due to weaker financial year and net retail area expansion.
Future Growth Strategies:
- Confident about rebounding consumer sentiments in FY25.
- Focus on expanding retail footprint and launching new campaigns.
- Project Manthan to be revamped, entering new categories related to weddings and accessories.
Competition and Market Outlook:
- Competition from players like Raymond and Tasva.
- Majority of new stores opened in Tier 1 and Tier 2 cities.
- Strong moats in place with high brand awareness and consumer understanding.
- Planning to enter new categories related to weddings and daily accessories.
Overall Sentiment:
- Optimistic about future growth post weak FY24.
- Confidence in the company’s strategic decisions and growth potential.
- Focus on leveraging existing retail network and adapting to changing consumer sentiments.
Vedant Fashions Q1 FY25 Analysis: Key takeaways!!
Vedant Fashions faced a challenging Q1 FY25 due to an exceptional lack of wedding dates. However, management remains optimistic about the rest of the year, expecting business to normalize from Q2 onwards. The company saw positive trends in July, particularly in Tier 2 and Tier 3 markets outperforming Tier 1 cities. Management is confident about the upcoming festive and wedding season in H2.
Strategic Initiatives:
- Focused on enhancing back-end operations, training, and retail network administration during the slow Q1.
- Planned retail expansion strategy for the remaining year, with a healthy pipeline for new store rollouts.
- Hired a new creative agency (McCann) to strategically rethink brand positioning and marketing campaigns.
- Launched a training app for fashion advisers to improve service quality consistently across stores.
- Implementing AI-powered cameras in stores to gather consumer experience data.
Trends and Themes:
- Shift towards larger stores in key markets to improve productivity and customer experience.
- Growing focus on premium offerings through Twamev and Mohey brands.
- Increasing emphasis on Tier 2 and Tier 3 markets showing potential for growth.
- Rising average selling prices (ASPs) driven by premium brand offerings.
Industry Tailwinds:
- Early start to the wedding season in FY25 compared to FY24, potentially extending the shopping period.
- Normalized spread of wedding dates across H2, allowing for better business planning and execution.
- Growing aspirational consumer base in Tier 2 and Tier 3 cities.
Industry Headwinds:
- Unpredictable wedding date patterns affecting business planning and inventory management.
- Potential economic slowdown impacting discretionary spending on wedding attire.
Analyst Concerns and Management Response:
- Store closures: Management clarified that closures were part of a strategic realignment, with many being replacements or shifts to better locations. The company aims to maintain a 2-2.5% churn rate in its retail fleet.
- Competition: Internal studies show stores near competitors outperforming by 4%, suggesting limited impact from organized competition.
- Ad spend reduction: Management explained it as a strategic decision to focus spending on H2 when wedding season peaks.
Competitive Landscape:
Vedant Fashions maintains its leadership in the organized wedding wear market. The company’s focus on service quality and expanding premium offerings (Twamev, Mohey) differentiates it from competitors. Management sees potential for 15-20% of the market moving to the premium segment (Twamev) in the next 3-4 years.
Guidance and Outlook:
No specific guidance was provided, but the management expressed confidence in achieving planned store expansion targets for FY25, primarily in H2. They aim to maintain the 14-15% annual retail area growth over the medium term.
Capital Allocation Strategy:
The company continues to invest in store expansion, particularly focusing on larger format stores in key markets. Investments in technology (AI cameras, training app) and marketing (new agency partnership) indicate a focus on enhancing operational efficiency and brand positioning.
Opportunities & Risks:
Opportunities:
- Expansion in Tier 2 and Tier 3 markets showing promising growth.
- Premium segment growth through Twamev and Mohey brands.
- Leveraging technology for improved customer experience and operational efficiency.
Risks:
- Dependency on wedding seasons and date patterns.
- Potential economic slowdown affecting discretionary spending.
- Increasing competition in the organized wedding wear segment.
Customer Sentiment:
Management noted positive customer responses to new store formats, particularly for Twamev and Mohey, with high Google review ratings (4.8-4.9) for new stores.
Top 3 Takeaways:
- Despite a challenging Q1, Vedant Fashions maintained healthy margins, demonstrating the resilience of its business model.
- The company is optimistic about H2 FY25, with an early start to the wedding season and normalized spread of dates.
- Strategic focus on premium offerings (Twamev, Mohey) and Tier 2/3 market expansion presents growth opportunities.