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Ladies and gentlemen, good day, and welcome to the Kewal Kiran Clothing Limited Q1 FY '24 Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Before we begin, a brief disclaimer. The presentation which Kewal Kiran Clothing Limited has uploaded on the stock exchange and their website, including this discussion during this conference contain or may contain certain forward-looking statements concerning Kewal Kiran's business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. I now hand the conference over to Mr. Hemant Jain, Joint Managing Director. Thank you, and over to you, sir.
Good evening. On behalf of Kewal Kiran Clothing Limited, I welcome everyone to Q1 FY '24 Earnings Conference Call of the company. Joining me on this call is Mr. Pankaj Jain, President Retail and Marathon Capital, our Investor Relations adviser. I hope everyone had an opportunity to [indiscernible] at our results. The presentation and digital release have been uploaded on the stock exchange and our company's website. We are delighted to start the year on a positive note by continuing our growth trajectory, registering an increase of 15.5% in our revenue from operation backed by consistent margins. In line with our consumer-focused approach as well as our brand acceptability, the April sales saw volume growth of 10.3% despite weakening of consumer sentiment and general slowdown in the sector during the quarter. Our continued focus on enhancing visibility and availability through increasing our brand focused EBOs, coupled with expanding our product portfolio and marketing initiatives are the key contributor for this robust performance. Continuing our strategy towards expanding exclusive brand-focused EBOs, the company has had a net addition of 27 brands EBO during the quarter, taking the total tally EBOs to 249 and overall EBOs to 454 as at June 30, 2023. Further work on identified 50 EBO sees ongoing and expected to be launched in coming months. This expansion aligned with our strategy to bring our products closer to the consumer, enhancing acceptability and convenience. Our enhancing brand visibility and aspirational value, we continued our marketing campaign, including outdoor advertising to advertisement across multiplex and theatres. Our recently conclude brand trade show of Killer and Easies and Integriti in July '23, showcasing our [indiscernible] 24 style trends received overwhelming response from our channel partner reiterating the strength of company's brand to connect with consumer in providing the unparalleled fashion experience. Our core brand has evolved over time from being denim-focused brand to lifestyle brands. Our strategy resolve around disciplined expansion successfully navigating challenges to emerge stronger than ever. By following our business approach and working on the primary principle of 3S, that is business stability, sustainability and scalability, we have proven time and again that our reason and the strategy are resilient. We will keep pushing our limit and reaching new milestones to rise above and are confident in our ability to further build on the progress made so far and continuing to drive a strong overall growth. Coming to the financial performance highlights. The stand-alone performance highlights for Q1 FY '24. Revenue from operations for Q1 FY '24 grew by 15.4% to INR 178.4 crores as compared to INR 154.5 crores in Q1 FY '23. Gross profit grew to INR 76.8 crores in Q1 FY '24 as compared to INR 66.8 crores in Q1 FY '23. Gross margin of Q1 FY '24 was almost similar at 43% as compared to 43.2% in Q1 '23. EBITDA for Q1 FY '21 grew by 16.4% to INR 34.1 crore as compared to INR 29.3 crores in Q1 FY '23. EBITDA margin for Q1 FY '24 stood at 19.1% as compared to 19% in Q1 FY '23. PBT for Q1 FY '24 grew by 58% to INR 41.4 crores as compared to INR 26.2 crores in Q1 FY '23. PBT margin for Q1 FY '24 stood at 21.9% as compared to 17% in Q1 FY '23. PAT for Q1 FY '24 grew by 56.8% to INR 33.8 crores as compared to INR 21.6 crores in Q1 FY '23. PAT margin for Q1 FY '24 stood at 17.9% as compared to 13.9% in the Q1 FY '23. Now we may now begin to Q&A session.
[Operator Instructions] First question is from the line of Priyanka Trivedi from Antique Stock Broking Limited.
So my first question is the growth this quarter has been majorly driven by jeans and the others category, while the shirts has grown at a lower rate of around 11%. So what has been the reason for same? And also could you mention what categories in the others category has grown?
Priyanka, it generally depends on quarter-to-quarter business. So generally, jeans and shirts is an overall business. T-shirts generally starts going down on the first quarter. Growth in a similar percentage. So you -- we work on a season plan, okay? The season you can say that, okay, the season for the summer season, which was carried forward, okay? So that's why most of the dispatch has happened for Denim on this proportion and the supply of shirts would have been higher in the earlier year, earlier quarters [indiscernible]. As an annualized basis, we work on a season plan, not on the quarter-on-quarter less. That's why you see there is a mix change scenario. And this will keep on happening on a quarter-on-quarter basis.
Okay. So for the year, our shirts category would grow the fastest, right? We maintain that, right?
We presume that.
And my second question is also if you could mention on the others category, what has grown faster than the other categories?
See, it's a minor percentage scenario, which it was earlier 5-point something, something which is now at 5 point above percentage. So it hardly doesn't matter. Other categories would include? -- excess categories other accessories categories.
Okay. So it's not like basically the accessory of the footwear and all must have grown at a faster rate?
[indiscernible] in terms of volume, that's the highest percentage, when you start putting it to a value, it has been for the percentage. That's the reason, okay, it's generally a minute percentage.
And my second question is with regards to the average realization that has declined by 12% for the quarter. So what is the reason for that?
Yes. We give numbers, okay. It's -- volume is based on all the categories put together. So accessories category, the volume has been tremendously high, but the other [indiscernible] has been low. The mix percentages given that the number like that.
Okay. So apparel, what would be the average realization of apparel on a year-on-year basis?
Generally, we say that, okay, average realization will grow by 4% to 5%.
And my last question is on the store expansion. So if you have to look at 22 K-lounge stores we have closed and 4 other brands, EBOs, we have closed. So that sums up to around 26 stores, and we have opened 27 Killer stores. So is it more like the stores have been converted into Killer stores? Or have there been store closures? And going ahead, how would that pan out?
You are right at an aspect. So there have been 3 reasons for it. One, some of the stores have been converted to Killer stores. That's one of the reasons stores have been under revamping also. So we generally put and they have been shifting of the stores also because of a higher size stores. That's two. And third reason has been the closure store. So it's a combination of all 3 markets.
[Operator Instructions] Next question is from the line of [indiscernible] from Shade Capital.
And my first question is related to the EBO. So as we talk about the full year basis, so what kind of -- what will be the number and 3-year basis for the EBOs?
Okay, we estimate that, okay, will still grow over targeting around 80 to 100 stores this year also.
Is it 80 or 100?
80 to 100.
And then any guidance for the EBITDA margins for the closing for the full year FY '24 and revenue guidance?
Well, generally, okay, our estimate is that revenue would be around 18% to 20%, similar would be with the EBITDA margins.
So EBITDA margins in this quarter, EBITDA margins are sustainable ?
Yes.
And just overall, what is the same in the because there are some new there some slowdown in the apparel segment because we had the [indiscernible]. So for the slowdown in the June quarter. So what is your overall sense, sir?
I wouldn't deny -- there hasn't been a slowdown. There has been a program and answers we have missed our estimates on the top line basis, okay? But we have ensured that, okay, in terms of the same scenario or the price package scenario, we have been able to achieve at of the EBITDA levels. And we feel that we will be able to achieve it on an annualized basis at least.
Hello? Yes.
I said, okay, I wouldn't deny that we have missed our revenue estimates on the first quarter scenario, okay? And I agree that there has been a little bit slow down, but we feel that we'll be able to achieve it on an annualized basis. And we have been able to achieve the figure on the EBITDA levels also.
And then what was the same-store growth in this quarter, Q1?
The SSC was around 4%.
Okay. And sir, now cotton prices are down turn relate to [indiscernible]. So we will get any benefit from this in the margin being further?
We did get that, and we felt that we did get that in the first quarter also. But since the sales was started pre-COVID this season, okay, that entire benefit was taken over by that category. That was one. And we felt that spot also, even if there is any levels of margins or betterment of the EBIT gross margins, we'll try to capitalize it and okay, do much more of advertising on that aspect.
And this year, sales were started in June or July?
Sorry?
Yearly sales?
This time, it was preponed. So, they started during June period.
Okay. So there may be some decrease in the sales remaining overall revenue?
Sorry?
So in the next quarter? There may be some impact on the revenues because due to the preponed of the sales earlier?
[indiscernible]. There's a fresh sense that the discovery [indiscernible] the sales we have to be stick to the market. So if the market continues till a sale period, I'll have to continue it during that period.
Next question is from the line of Shrinjana from Ratna Traya Capital.
So I have 3 questions. So one is on the other income. This quarter our other income was on the highest INR 11-odd crores. So what is the reason for that? So that's my first question.
The other income is the income on FDs and mutual funds -- the market has input, I think, [indiscernible] to the fair market value or -- that's the reason it was higher.
Okay. That's clear. And second is just a clarification. So between a K-Lounge store and Killer store the difference would be that the K-Lounge stores would have other brands as well, like Lawman and Integriti and other brands and Killer is just killer.
Yes.
Okay. And just one more question is on the same-store sales growth, like you mentioned for this quarter, it was around 4%. So I just wanted to understand how you calculate your [indiscernible]?
It expected on like-to-like format who have been present in the last quarter as well as this quarter.
And that's only for EBOs you're saying. The In-store ratio .
[indiscernible].
So the EBOs which were there in the last quarter, which was already open in the last quarter.
In entire quarter last year as well as this quarter.
Okay. So on that in [indiscernible] the growth that is powered around 4%.
Yes.
[Operator Instructions] Next question is from the line of Ankit Babel from Subhkam Ventures.
Sir, a few questions from my side. First is, have you taken any price hike in this quarter? Or do you plan to take any price hike in the coming quarters?
[Foreign Language] we don't want to lose the market share. [Foreign Language]
Okay. And you had also guided for launches in new categories, maybe in children category, or rates categories. So any progress on that?
Yes. The work already [Foreign Language] But we are more focused on kids wear [Foreign Language] very soon we are going to launch. [Foreign Language] But yes, it will launch very soon.
Okay. Sir, one more thing. What we understand is that your other brands, I mean, other means other than Killer, Lawman, Integriti and Easies are pretty small as a date. So any -- what are your plans to scale those brands? Will you focus on those brands? Or you continue to focus on Killer as the main brand?
[Foreign Language]
So any ballpark idea what could be the size of those brands? And what are you targeting in the next 2, 3, 4 years?
[Foreign Language].
Okay. And sir, my last question is, in the last couple of conference calls, you had mentioned that to increase your growth rates you are looking for some acquisitions. So just wanted to know any progress on that? Any categories you have identified any -- I mean, what's the progress on that?
We're are working on that. [Foreign Language] but my team is here, really working on that. [Foreign Language] But we are open for that. [Foreign Language]
Okay. So can we be rest assured that the ticket size of such acquisitions will be not more than the cash balance, what you have just from a –
[Foreign Language]
So what are your key areas you are looking at when you are shortlisting any candidate for acquisition. I mean, is it the category is the profitable brand?
Not other than the garment business. [Foreign Language]
But you are ready to buy even if it's a loss-making company, which you feel you can turn it around and –
Sorry, sorry. Last question.
I mean, what I'm asking is, are you ready to buy any company, even if it is a loss-making brand, if you feel you're now confident of turning it around and so you're ready for that also? Or you're looking at for some regional brands to capture some geographical areas. I mean what is your thought process while shortlisting any date for acquisition?
[Foreign Language]
[indiscernible]
Pankaj you're not audible.
To answer your question, too many deal as of today and in all these zones, okay, in all the genders also, okay? So when whatever fits best to our synergies will definitely export that.
Next question is from the line of Deepak Lalwani from Unifi Capital.
So firstly, I had a clarification on your store growth number. You have spoken about 80 to 100 stores. So this is net of closures and net of conversion store base?
Yes, net of closures.
And the second question was on the apparel growth rate. Our volumes have grown at 8% to 10% in this quarter. And we heard about a slowdown in the retail spend. So if you can speak to us about what is happening on the secondary sales level has demand picked up. Will you be able to achieve what gives you the confidence that we will be able to achieve the 18% to 20% growth for the full year?
Okay, the total quantity growth has been close to around 60%, right?
Yes. Yes. But that includes the accessories, right, which is a lower realization business. What I meant -- what I wanted to ask is on the apparel side, you've grown at 8% to 10%, but the aspiration to grow revenue is at 18% to 20%, right?
Yes.
So on the volume side, we'll have to pick up much more in the next 9 months.
What you said is that, okay, the growth has been there on the volume side also as well as the value side, right?
Right. But it is -- but it has been on the lower end, right? That is my question. What gives you the confidence that the next 9 months you'll be able to catch up so that you're able to meet your guidance of 18%-20%?
Deepak on our estimates, we have been short by about close to 3% to 4%? On the OpEx basis. Okay. I feel okay on the quarter and quarter becomes the bigger peso scenario, and we feel that we'll be able to okay, cover it up in the quarter 2 or the quarter 3 period.
[Foreign Language] India market is more dependent on the festival market. So we are confident, I talk to my channel partners also [Foreign Language].
And sir, your secondary sales improved from July onwards?
Yes, yes. [Foreign Language]
[Operator Instructions] Next question is from the line of Priyanka Trivedi Antique Stock Broking.
Sir, my question is on working capital. If you have to look at it on a year-on-year basis, they have declined, and it was majorly driven by inventory days declines. So what has driven this reduction? And is this sustainable for the year? Or will maintain FY '23 working capital days?
The working capital will stay at what it is. Okay, generally, we say it should be around 120 to 130-odd days period, okay, and it will stay in the same limits.
And my second question is that manufacturing expenses have reduced by almost 22% on a year-on-year basis. What is the reason behind that? And will that sustain?
Bifurcation prospectively. Okay, we have --generally consider the COGS, I would advise that.
Next question is from the line of Anurag Individual Investor.
My question has been answered. Thank you.
[Operator Instructions] Next question is from the line of Rajiv from DAM Capital.
Yes. So this is in terms of the stores under development now for the last year or so, the percentage of stores under development as a percentage of the current network was close to 30% plus, and that helped in terms of materializing in 4, 5 quarters. Now that number has come down to close to 12%. So this 70-80 store addition, do we have a stronger pipeline visibility in Q2 in terms [indiscernible]
I have Under development stores, okay, where contracts or things have been had is closer on 50 stores.
Yes. So I see that. So that 50 on a base of 450 currently that is 12%.
At a lower base also, I consider that 80 to 100 stores at the base also, I'm considering 80 to 100 stores only. It's the absolute quantity, which I'm considering not the percentage.
Yes, I understand that. The point I'm making is, for example, Q2 FY '22, you had 80 stores under works, and you had 323, which were operational, totally becoming 400-odd stores, and this 400 network basically got materialized by, let's say, mid of Q2 of 23%. So it took close to 4.5 quarters. Now if I look at the current number, which is put together close to 500 odd stores, if you take the historical last few quarters average, if it continues for 4.5 more quarters, and you'll hit maybe stores by the end of this year or maybe Q1 and versus, let's say, you're guiding for 530 number?
I'm saying that, okay, on this day, I already have around 50-odd stores. It also depends on the market sentiment. Since the market sentiments were lower, the customer also, okay, is themselves for investments. So whenever the market sentiments become better also the franchisee environment become much higher, you just have to work on a faster pace during that period.
Secondly, I missed a few data points. You initially said that there was a 10% volume growth. Is it 10% volume growth on the Apparel side?
That's true. Yes, that's true.
But if we reverse the volume number from the data you had shared, it seems that if you volume per store number, it is on an average 10% down as compared to, let's say, last year. So your voice is cracking in between Hello?
[indiscernible] Understanding. From what number are you making assumptions?
So yes. So you have given the total -- the total volume number, right, which is what 3 million, which is apparel plus Lifestyle? Yes, your voice is a cracking. I'm not able to hear.
That includes garment and accessories.
No, no, I'm coming -- I'm elaborating further. So -- and then you have mentioned that apparel is 60% of the total. So you take basically 60% of this number, and that will give you the apparel number. And then I divide by the -- and then I adjust it for the retail revenue, retail portion of the revenue and didn't divide by the number of stores. And that's where you see 10% Y-o-Y decline. And then the same way if we do, there is a price increase of close to 4%. And I assume that because you have not taken price hike, so it's largely mix led. So there is a volume decline seems.
Okay. The absolute number. Right now, the number of 30 million -- there's 3 million. Okay. So this number is a garment plus access it is on the overall company basis. The SCC growth, which I said was only on the retail format, okay? When you consider the number of store formats, this is the total number for all the channels put together. They're not divided by the number of stores directly.
No, no. I multiply it by the retail thing, right, 43%, which is the retail channel revenue.
Retail includes 2 channels, okay, which is my exclusive stores as well as LFS.
Yes. But your exclusive is -- okay, it includes the LFS as well, or?
Yes, it does. Sure.
Maybe I'll circle back offline on this.
The next question is from the line of Ritesh Bharjatia from Motilal Oswal Financial Service.
Sir, I just looking your quick comments on category of plus size. Do you have any plans to entering this category because we have seen there is a good demand for this product and essentially ShopperStop also entered into this category?
Not yet. [Foreign Language] Now the first focus is on the kits. We want to launch a kid first and then ladies. [Foreign Language]
Next question is from the line of Dhristi from ThinkWise.
Sir, In our presentation, I see that we have mentioned that we have 80 distributors and 3,000 retail MBO touch points. So are there any plans to increase that? And what is our thought was sense about that? And if you could share the [indiscernible] versus metro [indiscernible] of these retails if that's possible?
Can you repeat you please?
Yes. So what I was asking is that in our presentation, we mentioned that we had 80 distributors, the 3,000 retail touch forms, the MBO. So what are your thought prices of increasing data further if we are thinking over that? And in case you can get the bifurcation of semi-urban and Metro or Tier 1, Tier 2, Tier 3 city bifurcation of these retail MBO and if that's possible. Thank you, sir.
The bifurcation which we give, okay, on retail and nonretail, both have been growing on a similar percentage. And we have formed a part of the nonretail format. So it has been growing at a similar pace perspective. And I'm not able to directly give you a number exactly on how I will penetrate or okay at what value or what quantity is be penetrating to. When I say that to my retail as well as non-retail has grown at a similar percentage on this quarter.
So that is the same sales growth, right? So I wanted to understand if we are increasing the number of retail touch points.
We are. Yes. But I don't have an exact number right now.
I don't have an exact number on my plate right now.
Next question is from the line of Siddharth Purohit from InvesQ Investment Advisors Private Limited.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
Next question is from the line of [indiscernible] from [indiscernible].
Sir, my question is related to the competitive intensity. So we can in the last 2, 3, 4 years, has come out with the bigger expense and then we are selling teams in the INR 500 crores and INR 600 range. And in the last quarter, ShopperStop launched their brand in tune. The average size also INR 500, INR 600. So they are going big in the Tier 3 and Tier 4 markets also, Reliance Trends. So competitive intensity is increasing in the jeans and other products also. So what is our thought cases on this?
So when you say, okay, as a segment, then in , there is a economy rate, there is the, okay, mid-premium range and there is a premium range perspective. I fall in the mid-premium perspective, okay, what comparison you're doing maybe on the value for but I don't fall in that category. And when you're talking about the Reliance Trends I'm already part of Reliance trends.
Next question is from the line of Deepak Lalwani from Unifi Capital.
Sir, my question was on the K-lounge stores. How many stores did we close in this quarter? And how many were converted to killer stores?
Total closure was around 22. 6 to 8 okay, converted. 6 in the renovation and 6 were closure stores.
And sir, are we done with -- are we seeing more stores which should get converted into the killer format.
The number of sales on K-Lounge on a 5-year period. So a majority of the stores close to around 70% of the stores fall under a 5-year period. So I am revamping the strategy on those stores.
So all the stores will get renovated/ converted into a killer store? Is that the strategy here?
Working on a strategy aspect okay? How to sustain how to maintain both aspects.
[Foreign Language]
Sure. And sir, in the 50 stores that you have in the pipeline, what should one expect it to come within the few quarters?
[Foreign Language]
Sure, sir. And sir, see conversion included near right? These are apart from the converted stores.
[Foreign Language]
[Operator Instructions] Next question is from the line of Varun Singh from ICICI Securities.
Sir, my first question, I'm sorry, if this is a repeated question because I joined call a little bit late. So sir, the first question is have we taken any price hike in the Jeans segment?
No. [Foreign Language].
[Foreign Language]
The growth at around 15%. How are you saying 19%?
Segmental contribution so I mean, using that number I calculated. Sill what is the SSG number at overall system level?
[indiscernible] because some stores when we deal with the okay nonretail format, we don't get the exact numbers on the retail. So we generally decision only on the retail store format.
[Foreign Language].
SSG growth was around 4%.
[Foreign Language] So anything you want to call out what is the reason for our relative outperformance?
Good quality, better price, good service. [Foreign Language].
[Foreign Language]
[Foreign Language]
[Foreign Language] whereas competition and everyone has reported some contraction.
[Foreign Language]
[Foreign Language]
And sir, my second question K- lounge format, like how much more rationalization is left? [Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
To answer your question, the K-Lounge as a brand format is not closing down.
Understood. Right, right. [Foreign Language]
[Foreign Language] This year focus has been on the individual stores.
Okay, fair point. And sir, second final question is on the value price range. Earlier, we said that Integriti should be growing at a higher rate and because value price is a high-growth segment. [Foreign Language]. ShopperStop has also entered -- and we have a value brand also with us. [Foreign Language] sir, what is your growth plan if you have any, if you want to share? And as a consequence, what is revenue contribution, et cetera, we are expecting over -- over the next 1 to 2 years?
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Operator Instructions] next question is from the line of an [indiscernible] Individual Investor.
Just wanted to understand, on sales and distribution expenses, growing by 18% Y-o-Y. So what is a take on that? What are new initiatives which we have taken. And also, if you can help me with the full year guidance for sales and distribution expense?
Generally, okay, S&D expenses, we say that, okay, it remains in will stay within the base bracket of 5% to 6%.
Okay. So 5% to 6% on an annualized basis, right?
Yes. On the operating the operating come... If you're looking at it as has been at a similar percentage.
Okay. Great. Any plan for the upcoming World Cup?
[Foreign Language]
Sir, my last question, you guided for 18% to 20% growth. This is without taking into consideration of any acquisition as and when it happens.
Yes. Without consultation without any acquisition. Is your business.
And second, last question considering this time around the first season is starting a little late. Diwali would be in November. Will it have an impact on our Q2? in terms of dispatches and all?
We generally say that Q2 and Q3 should be looked together. So sometimes we get it because Diwali is postponed in quarter 2 and sometimes it's in quarter 3. Generally, you should look at a number which is Q2 and Q3 to together to give a realistic picture. To have a realistic picture.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Hemant Jain for the closing comments.
I would like to once again thank all of you for joining us on this call today. We hope we have been able to answer your query. Feel free to reach out to our IR team for any clarification or feedback. Thank you all.
Thank you. On behalf of Kewal Kiran Clothing Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.