Campus Activewear Ltd

NSE:CAMPUS

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Campus Activewear Limited Q1 FY'24 Earnings Conference Call. [Operator Instructions] Before we proceed on this call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause further results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements.

The Campus Activewear management team is represented by Mr. Nikhil Aggarwal, Whole-time Director and CEO; Mr. Sanjay Chhabra, CFO; and Mr. Piyush Singh, Chief Operating Officer; Mr. Krishna Kumar, AVP, Investor Relations. I now hand the conference over to Mr. Nikhil Aggarwal, Whole-time Director and CEO, for his opening remarks. Thank you, and over to you, sir.

[Nikhil Aggarwal, executive]

Thank you very much, Seema, and welcome, everyone, for joining our quarter 1 FY '24 Earnings Call today. Campus Activewear additively navigated a challenging market landscape, registering a 4.8% Y-o-Y revenue growth at INR 353.8 crores. In terms of volumes, the company sold 5.6 million pairs in quarter 1 FY '24.

The ASP in quarter 1 FY '24 stands at INR 629 vis-a-vis INR 644 in quarter 1 FY '23, registering a Y-o-Y growth of 4.1% in ASP. While the trade distribution has degrown by approximately 5.5% on account of higher base due to lower primary update on account of channel partners. Our D2C channels, D2C online and D2C offline, has delivered growth of 10% and 82%, respectively, on a Y-o-Y basis versus quarter 1 FY '23 supported by sustained secondary consumption by the end consumers.

The company continued its premiumization journey through new product offerings and enhancing its retail footprint in new geographies. The Indian Sports & Athleisure footwear is a sunrise industry with sports and fitness quotient, grabbing the significant mindshare amongst consumers across India, including metros, Tier 2 cities and interland areas.

Campus Activewear is well placed to satiate the evolving consumer demand and create value for the stakeholders in the coming years with its robust business model plays with vertically integrated manufacturing ecosystem growing omnichannel presence, premiumization focus, product diversification across product segments and categories back with strong balance sheet position.

I will now hand over to our Chief Operating Officer, Piyush Singh, for his remarks.

[Piyush Singh, executive]

Thank you, Nikhil, and greetings, everyone, for attending this call. We are contained to say that demand scenario is gradually improving with quarter 1 FY '24, delivering mid-single-digit growth vis-a-vis the last quarter and the same quarter last year. Now the final -- we are witnessing green shoots of recovery predominantly in the Eastern belt of UP and parts of Bihar.

We expect a full-blown recovery in the -- with the onset of festive season itslef. During the quarter, our B2C business continued to demonstrate robust growth of more than 20% on a Y-o-Y basis. Our trade distribution business has narrowed the degrowth gap and is expected to get back to the growth trajectory in the upcoming festive season with resurgence in demand in the Tier 2, Tier 3, Tier 4 [indiscernible]. We are already seeing early signs of that recovery happening in some parts of the country. Basis price segment, our sales strength in quarter 1 FY '24 has exhibited sustained premiumization, where in sales contribution from semi-premium and premium categories have increased to 72% as against 58% as witnessed in quarter 1 FY '23.

Similarly, on a category basis, revenue mix across men, women, and kids have stayed at 80-20 in the quarter -- in the current quarter, driven by our continued focus towards growing these categories. The company benefited from favorable channel mix, product mix and sourcing efficiencies, which results in a material improvement in material margin from 49.6% in quarter 1 FY '23 to 53.4% in quarter 1 FY '24.

Subsequently, the gross margin has also shown subsequent improvement -- substantial improvement from 36.6% in quarter 1 of last year versus 39.2% in quarter 1 of FY '24. We'll continue as planned investments towards brand building D2C network, infrastructure expansion and talent acquisition, which is key to our growth in the coming quarters, all of which is expected to generate margin-accretive impact in the subsequent quarters.

We are confident of restoring our trend line growth trajectory and margin profile in the coming quarters. I'll now hand it over to our CFO, Mr. Sanjay Chhabra to take you through more details on the quarter 1 FY '24 performance. Over to you, Sanjay.

[Sanjay Chhabra, executive]

Thank you, Piyush, and good evening, and welcome, everyone on Board. During the quarter, our revenue from operations grew by 4.8% on a Y-o-Y basis to around INR 354 crores. EBITDA stood at INR 66.4 crores versus last year's INR 62.2 crores. EBITDA margin stood at 18.8% versus 18.4% last year. Net profit during the quarter stood flat at INR 31.5 crores and PAT margin stood at 8.9% in Q1 FY '24.

On the balance sheet side, our net debt stood at INR 135 crores, which is a reduction of roughly INR 22 crores versus March 31 '23, wherein it was INR 157 crores.

Net debt-to-EBITDA ratio stood at 0.5x in Q1, as against 0.6x in FY '23. So our balance sheet demonstrates the position of strength with robust return ratios, such as ROCE and ROE of 23.5% and 22%, respectively as on June 30th. With this, I'll conclude and hand it over to the operator for questions and answers. Thank you.

[Operator]

[Operator Instructions] We take the first question from the line of Ashok Srivastav, an Individual Investor.

[Unknown Attendee]

And I really appreciate the management for -- you can see the recoveries happening in the market. If I compare with...

[Operator]

I'm sorry to interrupt you Mr. Ashok. Sir, are you on handset or a headset? Please switch to your handset, we are unable to hear you, sir.

[Unknown Analyst]

So first of all, congratulations to management for providing a good set of number. And if I compare the same with other peers, it seems to be in a decent stage where we are right now. Only 2 questions from my side, as a retail investor, I just wanted to know is that I stay Delhi and I have visited to a lot of stores, the physical stores. And I can see that there is a much more time, people are -- means the demand as per what we are expecting from Campus is not there, I mean, buying. Is it happening because of the older stock, which is still going on because I'm quite young and I have a lot of friends whom I used to discuss about the feedback of Campus and Bata. So what I'm getting pretty much feedback that in Campus store whenever the youth, which is aging between 25 to 35, they go to stores, but they do not find a trend, which is going on in the market. So whether the demand slowed down is happening just only because of cost of raw material? Or is it because of design of the products? That's my first question.

[Nikhil Aggarwal, executive]

Nikhil here. So no, we actually take pride in rather one of the biggest USPs of our brand is the fashion forwardness and the way we bring the latest design, latest rend, latest color pallets across the world, to India first in the most cost-efficient manner and the most price-sensitive manner for the consumer set.

So we actually -- like, for example, the sneaker range that we've launched. So this is a very trendy range. And similarly, we launched about 300 new designs every year along with an existing portfolio of 300 designs. So in total, at any point of time, we would have a portfolio of 600 designs. This is by far the largest portfolio of designs across any sports company, be it multinational, be it Indian, this is by far the largest portfolio.

So I would just like to say that we are totally committed to providing the best value for money products and the most fashionable and the latest design and technology to our country first here before anybody else. And that's the USP of Campus that we bring to the table.

[Unknown Attendee]

And my second and last question will be, when management is eyeing that we are going to be pre-IPO operating revenue front op side means EBITDA margin and everything. When we are expecting to return back seeing the current scenario? Yes, we are pretty much aware that there is inflation in cost of raw material and everything, but what exactly management is perceiving?

And how we are going to hedge all those things in future? Because if we see the economical scenario, which is demographically happening throughout the world, the Russia-Ukraine war is going on and everybody.

But still, that's the quality of management, but what exactly you people see that in how many quarters -- in next upcoming quarters, when we are expecting to get the exact operating leverage or operating margin, which we are receiving pre-IPO kind of thing.

[Piyush Singh, executive]

Piyush this side. Great question. So let me just appraise you that while we refrain from giving any future-looking guidance in this matter, but directionally, we can assure you that on a pre-IPO basis or just after the IPO, our margin was trending in the range of 19.5% to 20.5%. That's the kind of 1% trajectory we typically follow as of now. As you can see in the current quarter, our EBITDA margin is close to 18.8%, which is in close vicinity to our long-term trending trajectory. While the endeavor is to improve this with the help of operating leverage in times to come, we can assure you that with an improving macro scenario and with all the import matrices that we have worked on over the last few quarters, we'll very soon be in the same trajectory as you expect us to be. I mean, the same numbers that we kind of entered the market during the -- especially on the margin side with the IPO. So we are not very far off from that set of numbers.

[Unknown Attendee]

And only if I can ask you a last, very small question, when we are expecting challenger brands to get launched? Because in last con call, I think we had a discussion regarding the challenger brand, which will be sub 1,000...

[Piyush Singh, executive]

We had that discussion. We have a particular strategy in place that we are still testing it out in the pilot phase. As you rightly said, it is going to be a challenger brand. It has a certain specific objective in place. The mothership is continue -- will continue to be Campus. Our entire focus, management bandwidth and energy is towards this flagship brand only. Challenger brands serve a certain purpose and let's not get too carried away with the challenger brand concept because the whole -- the entire growth and the entire build-out and the entire outlook is based around Campus for us as a management, as a platform.

[Operator]

The next question is from the line of Mehul Desai from JM Financial.

[Mehul Desai, analyst]

First question on gross margin front. Now how do you see this trajectory sustaining in coming quarters? Do you see this kind of gross margin sustaining? Or is there any kind of one-offs in this? And also, typically, the second half margin, my understanding is second half margins are better than first half. You see that playing out given that you already have very strong margins in the first quarter.

So is it fair to assume that the second half can be better than first half in terms of margins also? And related to gross margin, also given that you have certain benefits now, will you look at some pricing corrections to drive volume growth? That's my first question.

[Piyush Singh, executive]

Yes. Again, great question. On the margin side, so if you have to dissect this entire thing, this improvement in gross margin is actually driven by 3 important factors, which is favorable improvement in channel mix, favorable improvement in product mix in terms of sell-throughs and again, sourcing efficiencies that we have kind of realized over the last couple of quarters, which we had already discussed in the previous commentaries.

Just to answer your question around the sustainability piece, there are no one-offs in these margin improvement. But at the same time, this margin improvement is kind of linked with the growth profile that the company and the team is able to demonstrate quarter after quarter. Now prima facie, our first half of the year is slightly lower on the margin side empirically because of a relatively higher mix of open footwear, which is tilted towards relatively lower margin compared to the closed footwear, which is our quota so far.

So as we enter deeper into the season, we believe that we do have an opportunity to improve this margin profile further. There could be a one-off in a month or so depending on the unpredictable macro. But I can assure you that as a team, we are very much focused on improving and correcting and optimizing all the input metrics that goes towards margin improvement. See macro is something that is out of control. But at the same time, our endeavor is to ensure that whatever is within our control, we should optimize that and pass on the benefit to all the stakeholders from here on.

[Mehul Desai, analyst]

Sure. And on the ASP front also, how do you see ASPs trend moving, given -- would you like to pass on some benefit? Or do you think 2, 3 -- 2% to 4% kind of ASP growth can sustain?

[Piyush Singh, executive]

So again -- see, if you notice that we have very reasonably priced our portfolio. The pricing is very, very sharp so far as a brand in our category is concerned. We have shied away from the temptation of increasing pricing some -- like some of our competitors over the last few quarters. That's the sole reason why we have sustained the momentum and people have kind of devoted us with whatever little growth in a difficult macro that you can expect of.

As of now, while we haven't taken any price increases, which are unreasonable in nature, we don't see any opportunity -- or we don't see any kind of a scenario where we would be taking any price cuts as of now. The portfolio is very sharply priced, and this has taken care of all the permutations and combinations and the scenarios wherein a certain growth has been baked in at this pricing.

[Mehul Desai, analyst]

Secondly, on this B2C online business, this 10% kind of growth, I mean how do you see this -- don't you think that -- I mean, do you -- are you targeting a much higher growth? The business obviously in 4Q had some issues. Are those issues now slightly normalized? And how do you see the trajectory for this B2C online business?

[Piyush Singh, executive]

See, so far as the robustness of the business is concerned, we see absolutely no concerns around the sustainability of the growth profile of this particular business segment. Yes, there were certain issues in quarter 4, for which we had to reset. We have recalibrated. And in the coming quarter -- in the coming quarters, especially with the onset of festive, we see this business getting back to it's -- the prime of it's growth. So from a full year growth perspective orientation, the business is very much on track.

[Mehul Desai, analyst]

Understood. And lastly, any comment on working capital. How is it versus March?

[Sanjay Chhabra, executive]

Our DSOs -- as far as working capital is concerned, there is a slight increase in investment in working capital, but our DSOs are very much in line with both March and last year same quarter. What we see is a slight increase in the DPO, which is good contribution and with subdued or muted demand scenario, we are sitting on some inventory, but we take that as -- we will leverage that investment in inventories in the upcoming festival season and that would help us to sort of push more volume in the market.

[Operator]

The next question is from the line of Harsh Shah from Incred Capital.

[Harsh Shah, analyst]

Very impressive margin performance this quarter. And given that there are no one-offs and seasonally weak quarter, I mean I just wanted to understand one thing on margins from medium- to longer-term perspective. Now if given the current quarter's performance and as we go into second half where we have much better margins, both at gross level and the benefit of leverage playing out aiding EBITDA margin as well, I think that the 20% margin kind of guidance barriers can be broken very early this year.

But going ahead, let's say 5 years from now, how do you play this thing, right? Like kind of do you want to keep the margins at 20% level and invest whatever incremental margins you get behind to get more volume in market share? Or is the endeavor for us to kind of keep increasing our margins by let's say, 50, 100 basis points every year until we reach a particular threshold?

[Nikhil Aggarwal, executive]

Nikhil here. Great question, actually, like we've also mentioned in our previous call, the end objective and the long-term objective for us as the brand is to make it the most #1 top of mind recall brand in the country. And therefore, for a longer term objective, we'll keep on investing behind the brand. So far, we've been investing about 5% -- between 5% and 6% of our revenue in the ATL spend. So we've grown this from about 3% to about 6% over these last 3 to 4 years.

Therefore, we strongly feel that as the company scales up, we'll continue to invest behind the brand and we'll maintain the marketing spend at about 6% going forward as well. So therefore, in terms of margin accretion and the margin profile, we've certainly taken a number of measures to improve the margin profile that you see today, the ones that you've spoken about earlier as well in terms of premiumization and the channel mix and the cost savings that are now coming in.

So we certainly believe that second half should lead to better margins in terms compared to first half. And in the long term, while we would refrain from giving you a specific guidance around the numbers, what we can tell you with surety is that the long-term objective of the company is to make the brand bigger and stronger. And in doing that, along with very, very good margin profile, so we will continue working on that objective. I believe that answers your question.

[Harsh Shah, analyst]

So basically, directionally, I'm not asking for a guidance, but directionally, basically, we do see the margin -- some of second margins kind of as the business close. Would that be a fair assessment?

[Piyush Singh, executive]

Yes, that would be a fair assessment over a longer-term horizon of, say, 4 to 5 years. Actually we'll be improving our profile from here on. But at some point in time, that's the balancing act we need to play as a brand wherein as Nikhil rightly mentioned, we will continue our sustained investments towards making the brand more robust, more likable and more reachable for the Indian diaspora in the country.

[Harsh Shah, analyst]

And the second question was more on the trade distribution part. I mean, the decline was 5% this quarter, so how would the split be for Northern East, which is a core market versus the emerging market of, let's say, South and West. What rates would be there specifically?

[Piyush Singh, executive]

While we have seen improvement in parts of core North Indian territories, which were earlier deeper into the woods, especially parts of Eastern UP and Bihar, they are actually recovering and hence, we are narrowing the gap between same growth profile and a slight degrowth quarter after quarter. West continues to do well for us.

So that's the rest of the country is just that some of the core markets in the Northern territory, especially UP and Bihar were not performing as per expectation because of a severe macro downturn and people witnessing kind of a recovery in these markets, especially Tier 2, Tier 3 markets were very, very sluggish. They have started bouncing back. And with the onset of festive, the real hope is the macro would gradually improve, inflation will subside and with more farm income coming into place along with the elections, we expect these markets to also bounce back.

[Harsh Shah, analyst]

Okay. Okay. No, I was just trying to understand the difference between the industry decline in Northern East and our performance in Northern East is huge.

[Piyush Singh, executive]

We have largely maintained the same performance because a 5% decline in value terms is somewhere in the vicinity of INR 10 crores here and there, which is like a couple of days of billing for us. So directionally, we don't see any significant decline happening in any of the markets, is that growth is still elusive in some pockets, they are also gradually coming back and with festive onsite right around the corner in the coming quarters, we expect these markets to also come back into their full glory as previous years.

[Harsh Shah, analyst]

Okay. Okay. And could you offer any comments on how July and, let's say, these 10 days of August were, compared to June quarter?

[Piyush Singh, executive]

I mean, we would refrain from giving any mid-quarter guidance. I hope you'll understand from that. I'll hope you understand because it's too early for us to comment on a quarter or a half yearly performance, which is just a months' output. Still a long way to go. So we'll refrain from any guidance on that part right now. But we'll certainly come back to all our stakeholders once the quarter has gone by and the numbers are out.

[Operator]

The next question is from the line of Yash of Stonebook.

[Unknown Analyst]

Our D2C offline channel is actually the fastest-growing channel for the company today. With an aggressive addition of EBOs across India. So wanted to understand the unit economics for a store? And how do you kind of get confidence in terms of the ramp-up in the middle of, let's say, what you are putting out as a macro store?

[Piyush Singh, executive]

So let me first add more color to it. D2C offline is a combination of our own stores, COCOs, franchisee stores and a large part of it comes from key accounts. So majority of this growth that you see in D2C offline, roughly to the tune of 82% is driven by key accounts and franchisee stores because now we are in a stage where we are not opening a lot of company-operated stores.

Actually, this is the page reposed in us by most of our franchisee partners, which are master franchisees for multiple stage and who are witnessing the ROI-based group in terms of the return on investment that they are generating on the current network that they are adding their own capital to the scale up.

So for example, some of the states like Gujarat, Maharashtra, Rajasthan, parts of -- or you can say parts of Central India, they are doing better than average performance across retail -- you can say, retail spread across various other brands. So in fact, their investment, which is coming into play right now. I hope that answers your question.

[Unknown Analyst]

Understood. So out of the 225 odd stores, how many would be company-owned stores?

[Piyush Singh, executive]

So it's roughly 90, 95 stores is the company-owned stores and most of these stores are vintage stores over the last couple of years, franchisees have added roughly 135, 140 stores for us.

[Unknown Analyst]

Understood. And incrementally, you don't plan to add..

[Piyush Singh, executive]

We'll be moving ahead with the addition of stores in a ratio of, say, 70-30 in the favor of franchisee to company.

[Unknown Analyst]

Understood. And the other question is on group meeting, you mentioned that, let's say, 20%, 22% margin EBIT is aspirationally a target. Just want to -- this is back in March, like few 5 months ago. I want to understand what is going to be the bridge from, let's say, 14% or today to achieving the '18, '20 and then 2022, that kind of EBIT margin from here on out?

[Piyush Singh, executive]

I believe you are referring to EBITDA here, not EBIT because directionally, what we've been maintaining across our calls in investor interactions is while we are currently trending at close to 19%, 20% EBITDA, the idea is that over the next 3 to 5 years, we should incrementally add on to EBITDA margins like 1% accretively year after year for the next 5 years. I mean there could be plus and minuses between one-off years here and there depending on how the overall economic scenario is.

But directionally, that's what we are aiming at. And eventually -- I mean we -- this is not a very capital intensive industry. At some point in time, our endeavor is also to become debt-free, which should take care of the interest part. So we have a certain milestone so far as EBITDA is concerned, EBIT is concerned, PBTs are concerned. We are heading very much in that direction quarter after quarter.

All the input metrics that are requisite for this kind of an improvement as any merchant play. So the road map is very well laid out for us. We just need to focus and we have to stay disciplined, gain more market share in the current scenario, wherein people are going for downtrading and then some kind of postponement. Idea is to gain more and more market share and shelf space. So rest everything else will fall in place with the help of operating leverage. And to some extent, we need the market to sort of start back up again for us to...

[Unknown Analyst]

Understood. And one question on, let's say, margins that you reported. If I were to look year-on-year, it's probably flat on, let's say, EBITDA and EBIT. But, let's say, you've seen a very sharp improvement in RM [indiscernible] gross margin. But that gets offset by something in the other expenses. I just want to understand, is it that we get higher gross margins in online since you report marketplace commissions in other expenses that largely and benefit gets knocked out. So because you mentioned in the call earlier that gross margin improvement is because of the product mix and channel mix. So just wanted to clarify that.

[Piyush Singh, executive]

So essentially, there are a couple of fixed expenses, which increases year after year, which we all know, which includes employee expenses, some bit of ESOP expenses which have come into play and a sustained investment towards advertisement and brand building. So these are primarily the expenses, which has led to kind of flattish EBITDA margin on a year-on-year basis, while the improvement, as you rightly mentioned, is on account of favorable channel mix and the product mix and largely on account of sourcing efficiencies that we have witnessed over the last couple of quarters.

[Unknown Analyst]

So it's not that largest part of the increase in other expenses is coming out of marketplace commission. Is -- that's what I wanted to kind of confirm.

[Piyush Singh, executive]

Not really. I mean there is some increase in marketplace commissions because of the overall change in mix of online business, wherein we are moving more and more towards marketplace model compared to the outright managed marketplace as it is. But that has already kind of contributed with the higher net realization in the topline. So it's kind of -- I mean, in a way, that increase in realization or increase in subsequent gross margin kind of takes care of that slight increase in commissions on account of market base sell-throughs.

[Unknown Analyst]

Understood. And on -- in terms, let's say, how do we think about ASP going forward because, frankly, there seems to be a certain price point within which, let's say, increasing the prices may kind of cause us to lose competitiveness on some of these platforms. So how are you seeing, let's say, our ASPs moving, let's say, 4, 5 years out in terms of the growth rate rather than a near-term picture, but can you move beyond this INR 600, INR 700 range, if you were to grow at, let's say, the aspirational target of 20% plus or whatever number that you at least plan for?

[Nikhil Aggarwal, executive]

Yes. So we see a good opportunity like we've been growing our ASPs consistently over the last 10 years at about 6% to 7%. Growing our ASP consistently over the last 10 years at 6% to 7%. But going forward as well, it's not that we need to take a big MRP increases or we need to enter categories above INR 3,000. We do still believe we have a pretty big opportunity within the spectrum of INR 1,000 to INR 2,000 due to the channel mix and the premiumization that we'll be doing within these price points, INR 1,000 to, let's say, INR 3,000.

So the market -- and given that the BIS, the way it's coming in now, and it will be implemented from the 1st of Jan 2024, with a lot of clarity that is coming from the government so far. It will be -- the primary objective of BIS again is to better and ban the imports from China, Vietnam and Indonesia into the country, the similar the way they've done it for the toys industry and tires and so on.

So we are extremely excited about the prospects of BIS as well, contributing towards not just the growth in margin, but also towards this ASP increase because a lot of the materials or the finished goods that's coming from China today are in this price point of INR 1,000 to INR 3,000. And those -- a lot of that will be pretty much leaving the market very soon. So that's the way we are looking at ASP. So we are pretty much in that very sweet spot of INR 1,000 to INR 3,000. We really doing need to enter into INR 3,000 plus categories in order to increase our ASPs.

[Operator]

[Operator Instructions] We take the next question from the line of Vatsal Dujari from CLSA.

[Vatsal Dujari, analyst]

I just had one question. So how are we performing in the Southern regions? And according to you the characteristics of the Southern market makes it a little more challenging versus the other markets for us?

[Piyush Singh, executive]

If I understood your question correctly, you are talking about our performance in Southern markets. So we have pretty much held forward, maintained our market share in Southern India market. So speaking about last 12 months, our contribution from North and Central India is close to 50%, 55% with West India contributing roughly 23% of our sales, East contributing another 17% -- 16% to 17% and South India is contributing roughly 11.5% to 12%.

So we have managed to gain traction in these markets. We are steadily gaining market share. And currently, our mix is mimicking the industry mix of sports footwear all across the country as well. So we are truly mimicking the contribution mix of a pan-India brand.

[Operator]

We take the next question from the line of Gaurav Jogani from Axis Capital.

[Gaurav Jogani, analyst]

My first question is with regards to -- in case of you have alluded that you would like to drive market share. So in that event, would we also be open to maybe readjust the price and volume growth in the near term because we have seen increased competitive activity from many new players coming into the market as well as the slower growth has pushed early USS also during the year.

[Piyush Singh, executive]

Piyush this side. Great question. Given the quite a few set of folks are really interested and if we are going to give more discounts to drive volumes. See, the clear answer is our portfolio is very, very sharply priced as the demand spectrum that we are currently witnessing in the market. So people are not actually looking for discounts, people are looking for the best value proposition -- price value proposition, which we believe that within Campus we are offering. We have never taken unnecessarily price hike. So there is no question for us to drop prices or to drive volumes. Volumes are still very much in place for us compared to the rest of the industry or some of the other peers that you may be tracking.

But the sole reason is people believe that they are paying the right price for the product that they are getting within this brand. And that's the sole reason why they keep coming back to Campus as their repurchase. So it's a very well-positioned, well-priced portfolio, we take care of our consumers at the very onset while pricing the portfolio itself.

Hence, there is no such need of playing a high-low game wherein, you first price the portfolio higher and then we have a deeper discount. Let's not take consumer for a -- let's not try and feel that consumer is dumb in that sense.

Indian consumer is very sharp. They understand the real worth of the product, and hence, they are not really seeking discounts, they're taking the right value for the money that they're paying. They believe the brand is really delivering.

[Gaurav Jogani, analyst]

So my question was more when it has to be competitive pressure, while few of your products are very attractively priced, I would agree to that. Just that because of the early onset of USS, consumer tends to seek more discounts. And hence, that was the question coming from my side.

[Piyush Singh, executive]

So certainly, I mean, we have seen behaviors across our online and offline formats. While our online discounts have increased by a couple of percentage points. But then again, I would refer to some of the conversations without taking names with some of our platform partners, where they say that the sensitivity is so strong in campus that even a 1% drop in price or 1% increase in discount drive volumes, which other brands, even by discounting as high as 10% incrementally unable to drive.

So that is the kind of price value proposition we drive by maintaining a very tightly priced portfolio and not discounting it unnecessarily. See volume pressures are always there. USS pressure is always there. Driving numbers is always there. And that's why as a management team, we maintain this feel that, see, you should always judge a brand or judge a platform by the strength of its portfolio or by the strength of its decision-making capabilities during testing times.

See, there is a lot of temptation that we can drive a lot of volume for discounting. But that really rubs against the grain or the ethos of our brand. So we know what we have to deliver. We understand that fully, but at the same time, we don't want to dilute the brand unnecessarily, that's for short-term gains. And that's the principle that we all stand by.

[Gaurav Jogani, analyst]

Sure. And my next question is just more related to the BIS implementation. We hear that a lot of these imports are in the price point of INR 1,000 and INR 3,000. If you can explain a bit in detail how you can -- this can benefit to the entire industry and Campus especially?

[Nikhil Aggarwal, executive]

Right. So like I mentioned, BIS is aimed at curbing the imports from China and Vietnam and Indonesia. And this is -- these are the 3 nations from where the majority of the imports of sports shoes is coming into the country. So naturally, once this entire volume, which is a very significant number, we believe that, that volume will sort of erode away. This will obviously open up doors to not just campus, but pretty much like the entire footwear industry.

And they should benefit the Make In India campaign that our honorable Prime Minister is encouraging all us to do. So that is the primary objective of the BIS. And on top of that, there were some clarifications also that have come in, in terms of that earlier there was some confusion regarding the non-BIS goods, how much time will the government get to various companies and the channel partners to sell through all the non-BIS goods.

So that clarification also come in that by 31st December this year, every company and every channel partner will need to update their stock statement on an online portal of their non-BIS goods and the government will give them adequate time to basically sell it off. So there is no -- the government is absolutely looking out for the domestic players. They are making sure that nobody goes under. And this entire move is primarily aimed at just curbing the imports. So that is basically the gist of it.

[Gaurav Jogani, analyst]

Sir, just one question here. Would this restriction would also be on the sole -- those that are imported from China, the raw materials or it is just on the finished goods?

[Nikhil Aggarwal, executive]

No, it's only on the finished goods. But naturally, finished goods is some of parts of sole and upper and all the raw materials. So if the finished goods, we should comply with certain requirement of BIS standards. Then actually the -- all the raw materials and the sole and also have to fall into place. So it just percolates down to the raw material as well in that sense.

[Piyush Singh, executive]

So Gaurav, I mean, there are texting parameters expected for upper material and sole material separately like abrasion resistance and flexibility and things like that. So individual components cannot escape BIS regulations per se. In online, we have to summarize BIS augurs well for a quality domestic brand because Ultimately, the standards would be -- the quality standards would be uniform for all the domestically manufactured products, be it the INR 500 shoe or be it a INR 1,500 shoe. That means there will be an enhanced pressure on local manufacturers who are cutting corners as of now, who are producing sub-standard quality just in the name of fashion.

So the government wants to go away with that as well, along with cheap Chinese imports or cheap international imports. Idea is to ensure that Indian consumer should get the best quality footwear. And at the same time, India should gear up in the coming times to create world-class quality footwear, which is ready for exports as well. So that's the overall objective of the government, which really, really works well in favor of an established domestic brand, which is totally focused on quality.

[Gaurav Jogani, analyst]

So sir, just 1 clarification on that. So because of this implementation, getting affected from the 1st of January. So in the interim period, do you expect any supply chain disruptions just before the implementation of this and because of which any stocking that you would have done?

[Piyush Singh, executive]

Not for us because anyways 90% of our sourcing is indigenized in nature. And we only work with high-quality vendors who provide quality staff. So nothing really changes in our lives.

[Nikhil Aggarwal, executive]

In any case, I'd just like to also clarify that for a brand like Campus, we've always any ways adhered to the highest standards of quality. So even though the BIS standards are decently stringent, we pretty much fall into -- I would say, from the previous legacy days also, we've been falling into these standards, just by the sheer quality standards that we maintain. So we've been complying with BIS anyways. So it's not a...

[Piyush Singh, executive]

I mean, as of date, our testing labs are already been approved by the government, they are already in place. We are just waiting for the testing standards to be released by the government. The moment we get released, we believe that we'll be able to turn out BIS certified footwear in no time.

[Operator]

[Operator Instructions] We take the next question from the line of Bharat Gianani from Moneycontrol.

[Bharat Gianani, analyst]

Two questions from my side. One is -- in the presentation, we have seen that you mentioned that in the trailing 12-month period, our growth has been kind of a flat if I see the overall revenue growth. So what would you attribute this factor to, the overall industry slowdown? Or have you seen a market share loss in the trailing 12 months. So that will be the first question.

[Piyush Singh, executive]

Bharat, we have directionally gained market share. I mean, given you cover the entire industry, you are very well aware of the fact that industry last year, all the segments put together and specifically sports footwear, has only -- see other segments are while degrowth, sports footwear has grown in single digits while on a trailing 12-month basis, we have maintained a growth rate of 24% to 25%, which is way above the industry standards.

So this clearly implies that directionally, we have gained market share across new and emerging markets where we have ported over the last 3 to 5 years. And at the same time, we have kind of held the port, maintained share in territories, which have seen some bit of degrowth over the period in discussion. So clearly, we have gained share, not otherwise.

[Bharat Gianani, analyst]

Okay. And so next question is that while we have mentioned a lot about how the margin trajectory over a 5-year horizon kind of will improve by -- is there a room to improve margins? But I guess the state is more concerned about the growth trade increase over -- in the last trading 12 months, as we have seen revenues getting impacted.

Obviously, that is the -- as you pointed out, that would be due to the market slowdown. But when do you feel that the Campus will get back to its growth trajectory that we have seen pre-IPO or if I may put it in other words, over the next 4 to 5 years horizon, what's your revenue growth rate that you targeted?

[Piyush Singh, executive]

Bharat when we entered the market with an IPO, our 3-year CAGR, 5-year CAGR was somewhere in the range of 24% to 27%. We believe that last year also FY '23, if you look at or trading 12 months, if you're referring to, we have maintained that kind of growth trajectory. So see, there has been some shift in the margin profile. But at the same time, we have maintained is that in a slowdown kind of a scenario, if we have to pick between the 2, we'll still go after growth at any cost for right now with a respectable margin profile because margins are easy to recoup in a stable macro.

But at the same time, it's our endeavor to gain more and more market share, gain more and more shelf space because that is something which is sticky in nature. Margins are easy to recover, but growth becomes elusive in competitive markets. So these are some pockets of opportunity. So we believe that slowdown is a blessing in disguise. These are pockets of opportunity wherein you get a short time gaining more market share when others are actually not that much focused on the same activity. I hope that answers your question. Very soon, we'll get back to our standard margin to find, there's nothing to worry about.

[Operator]

[Operator Instructions] We'll take the next question from the line of Mr. Deepak from IGE India Invest.

[Unknown Analyst]

I would like to understand what gives us confidence to gain the market further in future, what different things we are doing compared to other players. And what's the market outlook here on, are we behind the low growth situation from now onwards, the consumer demand picking up or -- like to have your views.

[Nikhil Aggarwal, executive]

So certainly, we've experienced sort of a lull in the market in the last 12 to 14 months. This is an overall macro slowdown, which every single footwear manufacturer has experienced. But going forward, we believe due to many reasons, like there's been a good monsoon this year, the festive season as well and the election is also coming up very soon. We believe that H2 second half of this year should result in definitely better demand along with margins -- complementary margins.

And even going back to the company basis, Campus, the biggest USP, we have 4 pillars on which we take pride really. One is the largest R&D in the country, the most developed number of designs that we churn out, the latest trends. The second is the largest vertically integrated ecosystem -- manufacturing ecosystem that we have. So nobody is even close to the kind of capacity that we can produce, which is about 35 million pairs of capacity every year.

And third is our entire omnichannel platform, where we have the largest integrated sales ecosystem between online and offline. And lastly, being the most innovative marketing techniques that we use and the strategies that we followed and which have resulted in significant appreciation of the brand in the last few years. So given these basic concept that the brand sort of hinges on, we have seen very, very, very decent growth over these last 10 to 15 years. And there is no reason that, that should not happen going forward as well. We just need to stick to the basics and keeping it simple.

[Unknown Analyst]

Any new category of product apart from sports shoes, which we are planning to enter like the other competitive player? And...

[Piyush Singh, executive]

We've launched a very exciting sneaker range along with our sports shoe ranges. And we'll keep on briefing our casual footwear category because we see a lot of potential in that category along with the sports shoe category that we currently champion. You'll see something really refreshing, really exciting in our current offering in the autumn winter season. Currently, our trade shows are going on. Signs are very encouraging, you'll see a lot of refreshing ranges, both in the sports shoe category and the sneaker category coming our way in the next couple of months.

[Operator]

We'll take the next question from the line of Manish Dhariwal from Fiducia Capital.

[Manish Dhariwal, analyst]

I am new to the company. And so I have some basic questions. So one is that, does the promoter family have any other businesses? Are they in software business?

[Nikhil Aggarwal, executive]

No, we don't. The promoter family is completely vested into only this business.

[Manish Dhariwal, analyst]

That's wonderful to hear. And secondly, has the promoter group reduced your stake in the recent past?

[Nikhil Aggarwal, executive]

No we've not.

[Piyush Singh, executive]

No, they haven't sold even a single share since IPO.

[Nikhil Aggarwal, executive]

No change since the IPO, not even a single share.

[Manish Dhariwal, analyst]

Okay. Wonderful. Sir, last thing is that see, I have observed that like a premiumization and everything is like -- I think it's very good to hear. But then why is it not being reflected in the ASP?

So ultimately, if I am selling a premium product, then I'd be able to secure a better price, which will reflect in my ASP. So that actually is not reflecting. So if you could just help me understand that bit.

[Piyush Singh, executive]

So see, there is sustained improvement in that ASP. If you look at our 10-year CAGR, the ASP is improved by 7%. So what you see at the store is a maximum selling price, maximum retail price, MRP company gets only a part of it. The rest of it grows as taxes and channel margins. So if there is, say, 10% increase in our MRP year after year, you will see only 4% to 5% of it reflecting in our ASPs because that's what the ratio of MRP to a factory is for a brand like us.

So we are predominantly a distribution-oriented company wherein our channel margin is close to -- so wherein our company margin is close to 50%, roughly 35%, 40% goes to channel and the remaining goes as taxes. So if 10% price increase is there or premiumization is there, half of it will reflect in the ASP and that's kind of the simple alignment between our numbers and the products that we see out there in the market.

[Operator]

[Operator Instructions] We take the next question from the line of Ashish Gupta from Goldfish Capital Advisors.

[Ashish Gupta, analyst]

Just one question from my side. Could the management please include the subcontracting charges specifically in our panel in Investor Day so that we get a cleaner picture of the gross profit margin for the quarter. That will be very helpful to understand, which is close to 5% to 6% of your revenue, the subcontracting charges, which is other expenses.

[Nikhil Aggarwal, executive]

I mean, while we hear you. I mean, some of these company level IPs because I'll eventually give away the kind of arrangement -- exclusive arrangements that we have with our network partners while we hear you, but this is some -- this is one information that won't be able to...

[Sanjay Chhabra, executive]

Anyways you're getting it in your annual report, that's the reason why since it comes in your annual report, which will a problem coming out in your quarter details as well. It's just a number.

[Piyush Singh, executive]

So we hear you. Sure, we'll take this into consideration. Thanks for highlighting that. It is anyways part of the annual report.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

[Nikhil Aggarwal, executive]

Thank you so much, everyone, for reimposing your faith in Campus. We are extremely delighted to share this set of numbers with you for quarter 1. And going forward as well, we assure you that campuses in the well-placed position, along with a lot of these external factors that are also getting tailwinds to the brand, like the BIS coming into play and the onset of festive season. So we're looking forward to a decent and a very good second half of the year going forward. Thank you, everyone, for joining the call.

[Operator]

Thank you. On behalf of Campus Activeweard Limited, that concludes this conference. Thank you for joining us. And in case of any further queries, please reach out to Campus Activewear Investor Relations team at [e-mail]. You may now disconnect your lines.