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V I P Industries Ltd
Earnings Call Analysis
Q3-2024 Analysis
V I P Industries Ltd
The company is navigating a challenging market environment but is confidently approaching an upswing starting from quarter 4, promising double-digit revenue growth. The gross margin has been difficult to manage, yet the team is dedicated to improving it alongside average selling prices (ASPs) through premiumization strategies. The company has seen a dip in EBITDA mainly due to increased freight, investments in e-commerce channels, and professional fees for bolstering e-commerce growth. However, optimism remains high for improvements in sales and profitability in the following quarters.
Inventory levels increased due to a slowdown in the market; however, the company plans to reduce inventory from INR 829 crores to around INR 600 crores in the coming quarters, which should also reduce warehousing costs. There's a commitment to cut down slow-moving inventory by 50% by March, demonstrating focused measures to streamline operations.
The company aims to drive volume growth without price increases this year, relying on strategies around premiumizing the product range and improving competitiveness in the mid-premium brand segment. Management articulated a focus on both profitable growth and revenue, expecting that as the company continues its march toward premium offerings, margins will sequentially improve.
New products were pivotal for growth this quarter, with a significant contribution to sales. The company acknowledges the importance of refreshing product ranges frequently to maintain consumer interest and differentiate from competitors. The goal is to enhance product designs and innovations, expecting to launch attractive new ranges that will bolster appeal and sales starting from February and March.
While the luggage segment drives most of the business, management intends to revitalize the Caprese brand and expects it to exhibit better growth only after the next few quarters, signifying deliberate pacing in brand development.
The company reported costs related to an accelerated e-commerce project with consultancy support from BCG, affirming its commitment to adapting to and capitalizing on digital sales channels. This initiative is part of the overall business transformation strategy aimed at strengthening the company's position in the online marketplace.
The long-term ambition is to transform the company's identity from merely a luggage company to a comprehensive travel solution provider. Acknowledging the journey is only 30% complete, executives express high confidence in the potential for growth and innovation, aiming to redefine the brand and expand its market share, with a vision to ultimately succeed in handbags and international markets.
With a market share of 37% among the organized players, the company is keeping a tight eye on channel-wise market shares and is set to become number one on key e-commerce platforms like Flipkart and Amazon within a few quarters. This initiative underscores the company's focus on capitalizing on the post-COVID shift from the unorganized sector to organized brands and seizing opportunities arising from disrupted supply chains, with an overarching narrative betting on India's trend towards premiumization.
Reflecting on the financial strategy, the company took confident steps by declaring an interim dividend without increasing borrowing limits, demonstrating confidence in its financial stability and future prospects. Whether a final dividend will be issued will depend on the final results of the fiscal year.
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Ladies a gentlemen, good morning, and welcome to the Q3 and 9 Months FY '24 Earnings Conference Call of V.I.P. Industries Limited.
[Operator Instructions]
Please note that this conference is being recorded.
I now hand the conference over to Mr. Snighter Albuquerque from Adfactors PR's Investor Relations team. Thank you, and over to you.
Thanks, Yashashri. A very good morning to everyone, and welcome to the Q3 and 9 months FY '24 earnings call of V.I.P. Industries Limited. From the senior management, we have with us Ms. Radhika Piramal, Executive Director and Vice Chairperson; Ms. Neetu Kashiramka, Managing Director and Chief Financial Officer.
Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategy, future opportunities and growth of the market or the company's services. During -- further, I would like to mention that some of the statements made in today's conference maybe -- may involve risks and uncertainties.
Thank you. And over to you, Ms. Radhika.
Thank you so much. Good morning, everybody, and thanks for making time for our call. I hope you all have had a chance to see the investor presentation that we have shared. I will not walk through the numbers on that again, Neetu will do that in a minute. I thought I would share some more general remarks about the company.
I would like to firstly address the issues head on. It has been a poor quarter for us. We recognize our underperformance, and we are not meeting our own standards. Having said that, I would like to reassure all our investors that in the quarter gone by, there have been many changes and many on puts, A lot of good work has happened in many different departments and in the company overall.
And the output of that in the form of higher sales and better margins is not yet showing, but it will start to show in the current quarter, that is Q4. And then further in Q1, and there will be a sequential improvement as our MD gets more time to make decisions and then implement those decisions and she is taking these decisions at a good pace.
Here, I would like to add that Neetu and I personally are on an excellence team. I believe we have very complementary skill sets. And I also want to reassure the investor communities that both of us are extremely committed to our shared common goal that we shared with you all which is shareholder value creation.
So the fact that the quarter's performance is only down standard, and that we -- our share prices have grown the way you would since COVID is a matter of grave [ control ] to everybody at V.I.P. and the main way we are using to tackle this is a combined teamwork between Neetu and myself to make good fast decisions on a number of different focus areas, which I will outline. And I'm extremely confident that there will be a much better performance in the calendar year 2024.
So which are the focus areas? Basically, there are 4. The process of product range. Neetu is going to talk about it in much more detail, and it should be visible improvement in the stores across the country sort of more or less from this month onwards a little bit and then more and more from March and April onwards. So the products are much better. The second focus area for us is premiumization. We all know that currently Aristocrat is the largest brand in our company. But certainly, the company's role is that Skybags of V.I.P. should be the largest brand. We are not meant to be a value company. We are only the premium company, and we need to get back to our [ driven ] ways.
The third area in which there has been a lot of work has been on the leadership team. Neetu will talk about this in more detail. There were some intimations late to the stock exchange towards the end of December, and we are happy to address that. And the fourth and final piece that we are working on with a lot of focus is improving our availability and fill rates as well as the cost of our supply chain. So there's good work happening on all 4 areas and the key areas, the first is the product. The second is premiumization. The third is the leadership team and the fourth are fill rates and cost of supply chain.
So with that, I'd like to conclude my general remarks and hand over to Neetu. But I would like to reiterate at this time that the top management of V.I.P. as well as the promoters are totally committed to shareholder value creation. In fact, we stand to gain the most as this happens. And we are confident of the same in 2024. Thank you, Neetu, and over to you.
Thanks, Radhika. Good morning, everyone. Thank you for joining the call. We announced our third quarter results yesterday. And before we talk about the results, let me just highlight as to what structural areas, some of the things Radhika already spoke, I'll skip that. But what I started with, so it's 4 months now, I visited 20 markets in the last 4 months to understand from my own eyes as to where we are and where is the competition.
Good thing, which -- so 2 good things, which I observed is our presence is across the length and breadth of the country. However, I think competition is slightly ahead on product from our standpoint. But other thing which I realize is that the brand recall for all our brands is quite good, especially V.I.P. and Skybag, they are well known into the market. And therefore, if we do a product right I think we can win this game quite fast.
And I'm very happy to say that we having launching 37 new ranges between December to March. 5 to 6 are already done and a lot is going to happen between Feb and March. Definitely, if you go and see our stores after around March, you'll see a startling difference. Even if you go today, what it was 4 months back, you will see that difference, visible difference. The other thing lot of time I have spent in last 4 months on having the right team to take this organization to the next level. 60% of my team is either new or handling a new portfolio. You must have seen that in the presentation, which has been shared.
So a lot of fundamental changes. So I think I spent a lot of time on all these things in the last 4 months. And these changes now will start to follow into the performance. You've already got the presentation. So let me just give a few highlights. I'm not going to talk very detailed on the numbers because everything is available with you. I will maybe give more time for you to ask me questions, and I can answer it in as much detail as you need.
So quarter 3 recorded a revenue growth of 4%. However, domestic grew 6%, which means International had an impact. This was mainly because of China coming back and also slowdown in some of the Middle East areas. However, there is one good thing, which has happened because our entire focus was on clearing the pipeline inventory. So our secondary sales for quarter 3 is a growth of 24%.
And e-commerce has seen quite a heartening growth, 65%. So I think our decision to accelerate e-commerce growth has helped. We have opened 25 new EBOs during the quarter, mainly through [ FR ] route. Last time we had spoken about a few airport stores coming up. I'm happy to inform that 2 stores at the Mumbai Airport are operational and 4 additional in different cities is coming up before March and 10 more in the FY '25.
One more good thing happened in quarter 3, V.I.P. has grown double digit. So for the first time after the long V.I.P has seen a double-digit growth. And this was behind our premium launches. So there were 2 new launches which happened in V.I.P during this quarter, which was a lightweight category, I think that's got a great response, and I'm quite hopeful now that our V.I.P. and Skybag brand growth will start to come in. Aristocrat also grew. And Aristocrat now is on a sustainable growth journey.
So entire focus of my team going forward will be on the premiumization. You'll also witness a lot of launches. And because of these premium launches, I think the growth will also start to see January is also showing some green shoots. We should be -- so we are growing double digit now in January and for the quarter, it should be upward of 15%. ASPs have started to grow. So our realization piece we saw in quarter 3 has started growing, and this should further see acceleration in quarter.
And so basically, premiumization will be 2 ways, upgrading the existing customer and also adding new customers to our portfolio, which was either buying a competition product or buying something out -- from outside the country. So our product portfolio is going to compete with everybody in the market today.
On profitability, one good thing which we have seen last 2 quarters, gross margins are -- have reached where it should be. So we are in the range of 55%, 56% already. And gross margin is actually more difficult than anything else. Once we have received the gross margin right, I think balance should follow. And also with premiumization and ASP improvement, which should further strengthen our position on getting into margin improvement. EBITDA definitely has seen quite a sharp reduction.
This is mainly because of increased freight, accelerated investments in e-commerce channel, marketplace activation and professional fees for accelerating the e-com growth. if If I have to talk about the market indicators or everything it looks like positive, the air traffic passenger traffic, hotel occupancy remains positive. And therefore, I am quite confident that starting from quarter 4 our sales numbers should start to increase.
So first, you will see growth in sales followed by profitability. And me and my team can assure you that we are working tirelessly to arise to make this happen. Also understand that all of us have this [ ESR ] program. If we do it right, the V.I.P share price improves and therefore, we also gain. One more thing is that we have extended this program now to second level also. So basically, 50 people have -- are part of this program. Earlier, there were only 11 people for this program, today there are 50 people. And therefore, I'm quite confident that together, V.I.P. team will make this company into a next level, just give us some time.
And I think your patience will help. In this quarter, quarter 4, I'm assuring that we'll definitely have a double-digit revenue growth and much better starting from quarter 1 FY '25. Also, all the efforts which we have taken, I think the results are not visible in quarter 3, it's invisible, but visibility will start soon.
With that, I think I will open the floor for questions.
[Operator Instructions]
We have a first question from the line of Jinesh Joshi from Prabhudas Lilladher.
I have a question on our inventory. I mean if I look at 1H, if I remember right, we were at about INR 753 crores. And I believe in this quarter, we have filed up another INR 122 crores. So any reason for not consuming the existing stock, but building more onto it? And also, how should we see the warehousing costs move in the near term because of rising inventory?
So basically, you are right, the inventories have gone up, mainly -- so there is one fundamental change which we are seeing. We've also alluded that into our presentation, that certainly, we are seeing a bit slowdown into the overall market. And that is the reason why you see this inventory. However, we already have some plans around how do we take care of reduction in this inventory.
Warehousing costs currently whatever it is, I think in next 2 quarters, it should come down because we have plans to reduce our inventory levels from where it is today, it should be in the range of INR 600 crores.
Sure. And madam, second question is with respect to our revenue. I mean, in this quarter, is it a grossed up for the performance marketing fee towards e-comm? And if yes, can you share the quantum?
So there is no change in the accounting because in the middle of the year, we didn't want to do that and even auditors did not agree. But going forward, we'll see if we have to do that. But that has not been done.
Got that. One last...
Compared to last quarter.
Got that. Got that. One last question from my side. I think in the PPT, we have mentioned that the other expense was high due to higher freight. So if you can explain the reason behind that. And also, our tax rate was at about 46% in this quarter. So any specific reason for it?
So one, the freight is high because of multiple movements of goods because we want to liquidate this inventory has had multiple movements. And tax rate is higher mainly because of deferred tax assets which got created because the profits are low. We created a deferred tax asset. However, for the year, it will be around 27%.
We have a next question from the line of Lokesh Maru from Nippon Mutual Fund.
Two questions. One is, are we also selling uppercase in our retail outlets at this point and why would that be?
No, let me answer that. We are not selling uppercase in our retail stores, we consider uppercase a new competitor in the market.
Why that question, but like -- did you see uppercase in our outlet?
Yes, yes. That was a V.I.P. exclusive outlet. Okay. And my next question...
Tell me which outlet? Please send me an e-mail.
Sure. I will send that offline. Another point is on profitability. It's quite visible that our profitability margin structure has changed now given the state cost and performance marketing spend, e-comm expenses, et cetera. So that margin has come down to 1.2%. Could be if you -- tax will be higher than that, obviously. But any guidance on earlier if our -- was 18% to 20%. Now it's certainly lower, but how do we proceed that going forward?
We'll still maintain our guidance of 18% to 20% over the next 12 to 18 months. Whatever you are seeing currently is also because the sales growth is lower, and therefore, overhead absorption is not having -- is not happening at the pace at which it should have happened. So you will start seeing improvement starting quarter 1. And in 12 to 18 months, we will get back to whatever promises we have done. So 18% is something which definitely you will see in the next 18 months.
Okay. And ma'am, as our sales grow, would this commission that you have to pay to the e-comm channel, the website, would that be proportionate to sales? Or is it fixed in amount?
It will -- it is -- as a percentage to revenue. However, last year, we -- it was like first year of our acceleration, therefore, the percentage was high. It will come down as we -- as the growth happens.
We have a next question from the line of Jaiveer Shekhawat from AMBIT Capital.
Neetu, first question is on relation to the resignations that have happened in the management revenue, especially the middle level management, especially post Anindya's exit. So one, could you, say -- talk more about your strategy to sort of stem this attrition and have you already found replacements?
Let me take that on. I think Neetu have gone about things in a very organized manner. The change of leadership and so at the MD level happened in August. Neetu has time to assess the market, the market business, to assess the team. And then in a very [ cash ] related and planned manner, there were some resignations in December. And I think all the positions are full at the moment, we are expecting a CFO to join shortly.
Yes. And so this resignation was planned to some -- yes. it's not that it happened because of...
Sure. And secondly, when I see your growth now if I compare it versus the pre-COVID levels, whether you take FY '19 or '20. I think growth has only been around 20%, 25 percentage and a large chunk of that has come via higher realization. So you are still growing your volumes in low single digits. So what it explains that -- and what's your strategy to sort of grow your volumes from here on?
So volumes did grow. So basically, what had happened, value growth is low mainly because of the mix change. And Aristocrat grew faster than the other brands. And Aristocrat price realization is almost 60% of what V.I.P. or -- V.I.P. or Skybag realizes. So volume growth is there. Going forward, I already alluded that we have a strategy for premiumization. And volume growth will happen because this year, we are not taking any price increases because we are at a good gross margins, and we are not taking any price increases. So whatever growth you will see will in volume terms only.
Right. And last quarter, I think you also alluded about the margin improvement, and we understand it's largely because of the higher inventory that you're carrying -- that you're incurring that additional trade warehousing costs. So one, that you did mention about the remark amount that your soft luggage are not in place and you already hold a lot of inventory. So what's your strategy, exact strategy to sort of liquidity that part?
So I cannot talk about strategy on the call. However, we can meet maybe one-on-one or have a call. I can tell you. However, the plan that 50% of my slow-moving inventory, I should reduce by March.
Sure. And lastly, if you could talk about the range of competitive intensity that you are seeing and whether your competitors are sort of resorting to aggressive discounting to push their sales? Is that what are you seeing in the market?
Not so much now. I will say I have -- in the market with 2, 3 larger players and then a number of new entrants. And it makes it exciting to compete in this market that has a lot of potential for growth. I'm not surprised a lot of new entrants.
Because in the past, what we have seen is we have, in some quarters held on to our margins and compromised on the growth. So there has always been a growth margin trade-off. So what's your strategy going forward as they had resort to...
So with my premiumization strategy, I think the way I look at it is I should have a profitable growth. And with premium strategy, it will automatically happen. So I'll go after profitable growth. Our brands, V.I.P. and Skybag are very strong. We have experienced it in the past as they are not showing the strength in the market right now, they will soon on the basis of stronger product lines, better fill rates and a more focused within the company on our mid-premium brands rather than value part.
And over the next 12 months, you will definitely see some products which are first in India, then first in overall luggage industry and then something out of the box, I think just wait and watch.
We have our next question from the line of Manish Poddar from Invesco Asset Management.
I just had 2 questions. One is, you spoke about product quality and probably not meeting to expectation. Just trying to understand...
Sorry, let me clarify, not quality, attractiveness of the ranges. That's the product design, not product quality.
So can you probably double click and help us understand what are you doing to probably in terms of interventions, not really getting into the broader strategy, but if you can probably help me understand 2, 3 areas where you're taking cost correction?
So one, we are investing in the right team. I think design and development innovation is key focus. Manish, you can come to office, I can show you my new ranges. It's all there. Come to office, you can see. I can show you the entire range, which is coming up in Feb and March. You yourself will see the difference.
Okay. Okay. And would it be right to say, let's say, when you -- and first you will correct and this inventory amount which you want to get it down in the next quarter, would it be right, let's say, when you look at FY '25. So that is the year where you look at probably build up sales again, we get the right products at pace and probably margin is not one should focus in FY '25. Is that how one should think about that year?
I said earlier also that I'll be focusing on a profitable growth. I'm not saying I will reach 18% EBITDA starting quarter 1, but that will be -- you'll see a journey. So sequentially, the margin improvement should be visible. But I focus on both. And revenue, you will start seeing better revenue growth starting from quarter 4.
I don't want to put in a number, but what I'm trying to understand is, let's say, would internally, you always be happy with, let's say, 15% growth in, let's say, 16% to 18% margin or would you mind 20% growth and 15% margin?
Manish, I think, I need 1 or 2 more quarters to tell this because a lot of things are like moving parts which I'm working on today. So just give -- I don't want to put -- at this point.
We have a next question from the line of [ Bhavin Rupani ] from Investec.
My first question is related to your Skybag and V.I.P. Ma'am, we have been saying that our focus is to increase the share of premium and mass product, but the combined share of both the products has been declining continuously. Can you please list down some of the corrective measures that we are taking over you apart from the new launches that you are supposed to make in the next couple of quarters?
Yes. So as I mentioned that we are looking at realigning our portfolio basis the competition, something which is better than competition, something which is not seen in the travel industry and something out of the box with that premiumization strategy, which is definitely on V.I.P. and Skybag you will start seeing. And actually, if you see in this quarter, quarter 3, our V.I.P. has grown high double digit, 20% after a long, long time, it is showing.
And we launched just 2 or 3 ranges in this quarter and that too mid-November means 45 days of new products has given us that kind of result. So I'm very, very sure that our new product portfolio. Also, we are focusing on V.I.P. because earlier, I think I want to change the perception that V.I.P. is an older brand. I think that's something which I want to change. If you go to our store today also, you see a product which is a Airtron, I think you can feel the difference. You can go to any V.I.P. store launched today. You'll see these new products which are doing fantastic.
Got it, ma'am. And is it possible to quantify what incremental growth in V.I.P. is from the new product in this quarter?
Entire growth is from new products in V.I.P. for this quarter.
Let me just -- so at any given month, typically, new products can be 20% to 30% of our sales because that's the nature of our industry. It's possible that in the last, let's say, 18 months, the frequency of our new product launches was not good enough. Our products are getting dated. That is one basic theme we are getting back to. In any consumer brand, I think the strength of the product assortments really drive growth, it's what attracts the customer. And that is why we are focusing on products, and this is the heart of the business. Just to add, travel is also becoming part of your -- something which we are carrying, and it is becoming more fashion as compared to earlier it was convenience.
And that's why also design, color, innovation makes a lot of difference. And we have noted that our product range was getting a bit faded and dated. We did not do enough -- good enough product development in the first 18 months after COVID, but Neetu has been working extremely hard on this for the last 9 months.
Got it, ma'am. And on Caprese, revenue more or less has been stable over year. What could be the reason over here? And what are the steps that we are taking here as well?
So one, lots to do for me on luggage, which is 95% of the business, and therefore, maybe it has got slightly lower. It will take 2, 3 more quarters for you to see better growth in Caprese.
Got it, ma'am. And I understand your other expenses have increased by almost 7.5% of sales as compared to last year. Is it purely on account of freight cost?
One is freight. And the second, we are doing this accelerated e-comm project with BCG. So that cost is also part of this other expense.
Got it. Got it. And if I can squeeze in one more on incremental capital allocation, what is our current capacity if you can separate it between hard luggage and soft luggage? And what is the incremental capacity we are adding? And by when it will come back...
In hard luggage, we have 94% capacity utilization. In soft luggage, it is around 70%. In hard luggage, we are looking at few models whereby we will be doing a distributed manufacturing. And it does not require too much of a CapEx at this point in time.
And also to suppliers from China.
Yes. And also as a strategy, all my new design, which are something different are coming from China.
Got it. So what would be the capacity as of now? And any plans to increase over here?
I don't want to put that number. But it is 20% increase from last year on hard luggage. Soft luggage, we have not increased. In fact, we are converting our price capacity into duffels and backpacks, which are large categories, and we have good plans for those 2 categories to grow.
We have a next question from the line of Tesjash Shah from Avendus Spark.
First question is, based on your expensive market business that you plan, how would you articulate the core problem statement of constructing the revival plan?
It's all about product, product, product, nothing else and premiumization and ancillaries. So right product at the right time to the right consumer. I think that's how I define it. And therefore, my first few months, I'll spend more on product. Tejash, [Foreign Language].
And ma'am, anything on Carlton because of the consumer being always...
In next quarter, year-end, I will do a physical analyst meet. We will show you what we have done, show my product range to see -- so that everybody can see what has happened in the last 6, 7 months.
Sure. And then secondly, your guidance on 18% margin, considering the challenges that you are handling today, would we say that 18% will be an exit month -- or exit quarter guidance for next year? Or do you think that...
Not next year. I said 12 to 18 months from -- yes, which means exit of that quarter at the end will be that 18%.
Perfect. And when looking at the current debt situation and inventory situation, I was just curious what prompted the decision to declare interim dividend because we have a cash requirement in the business to fight or make all these changes.
Understood. I think we took from middle part, which is that we did not increase our borrowing limits in order to fund this dividend. And at the same time, it also reflects our confidence in the future that we did not think this was such financial burden or impact on the company. We have also some confidence at the same time, take it in a measured way. And we will decide about final dividend based on the final results only. So we'll see whether there should be a final dividend or not.
Got it. And then last, if I may, have you been forming a new team of what talent and cultural gap, are you actively addressing through your hiring?
Speed of decision-making is a #1 priority, granular detail and understanding of our business, industry and company are second. They're not complicated with no baggage. And no...
So no wages means are you going outside your industry to higher talent or...
Always have to do, yes, that is -- but that is common because in our industry, it's a very small industry. We all know each other our competitors fairly well. So we often go outside industry as for our competitors. It's not unusual.
We have our next question from the line of Shobit Singhal from Anand Rathi.
Ma'am, can you please share the volume growth for this quarter and for 9 months?
I think volume growth for the quarter was negative 4% and 6% growth for 9 months.
Okay. And what is the current store count we have? And what is the target for the year-end and next year?
So we have added 25 stores in the current year, which is taking the overall number to 541.
Okay. And what is the target for the next 2?
Target is 600 for the -- [ 60 ] so we are looking at around 600.
Okay. So this is year we will -- and by -- okay, understood.
This year, we should end by 550 stores. Airport stores are coming...
And next year, so you are saying that we will be adding only 40 stores?
We'll be adding 50 stores, so 550 and then 600, so 50 stores.
Okay. Understood. And all will be on the franchisee, right?
80% franchisee because certain places, large malls, they don't give it to the -- other than the manufacturer or the brand company.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
I have one fundamental question. Over 4 months, you have walked the journey, and there is a lot of scope and there is work which is done, which Radhika alluded in the beginning. So task force members has become from 11 to 50. I was more curious in your weekly, monthly, quarterly review. What are the things are discussed and what are the top 3 priorities the management is concerned about? I mean though, Neetu you said that the product is one of the things which you're focusing. But I was more curious what are the things? What are the parameters we are measuring the performance of the team?
So we mentioned a couple of times. So one big thing is premiumization, which means NPD, which is New Product Development calendar. So if a particular product was supposed to be launched in February, will getting launched at the same time or not is one of the parameters, which I see. The other focus area is fill rates. So we keep a track of what is the fill rate because a lot of times we are losing business because we are not able to fulfill the product on time.
So I think that supply chain is something which is the overall rehaul is happening as we speak. And these are very are the -- too important -- and that our internal the leadership and management and mid management changes to support the -- so once you have other products, and once you have fill rates?
And I keep doing standup meeting, okay, if you're saying what are you kind of you I started some stand-up meetings, especially on the inventory. So inventory is something which is one of my other key area. So I do a weekly stand-up meeting. However, the team who is responsible. So we created a cross-functional team. So this is how we have started working. I have a PMO, there's MD office and you know...
It's so very fast, that is the main thing. And she understands a lot of detail very quickly, and she's a quick decision maker.
Okay. My second question is when you and Radhika stitched the new strategy for revival 4 months before. And there is changes in the manpower, middle management in terms of supply chain reorganization. In that whole journey, at this point of time, where we are in terms of our ambition, 50%, 40%?
30%, 30%.
Sorry?
I will say 30%. And you can see that less, Neetu say no, she -- I say it. And I'm not saying it's 30%. As to me that's not negative, it's positive, which was how much more potential we have to grow because I think I need to have the capability to look at what I would call immediate performance improvement, which is for the current fiscal and the next fiscal as well as second horizon, which would be [indiscernible] et cetera. So on that point, I say 30%. If Neetu wants to say 50%, I'm fine with that.
So let me turn this in a follow-up question. If 30% you're giving a confidence that we do...
No, no, no. I am 100% confident. Please use -- where are you on the journey...
No, no, no. Radhika, what I'm asking, in the 30%, if you're getting this confidence, if you've been able to successfully drive that 100% strategy work you have in mind, the performance will be beyond your expectations. That's what you're trying to communicate at this time.
Yes. I hope beyond that or no my expectations are...
As an organization, I tell you what is 100%. So today, we are known as a luggage company. I want this company to be known as a travel solution company I think that's my long-term ambition and that's what the 100% is. So today, on that journey, we are 30%.
100% for me includes success in handbags. It includes success internationally. That for me is 100%.
Plus as I said, not only luggage company, it's a travel solution company. Anything or everything about travel means V.I.P.
Okay. My second last question. When you see 9-month contribution from premium and mass premium is about 56%. In terms of actual market share, how this number stacks in premium and mass premium segment?
So we -- it is very difficult to get this data because this industry is not tracked by AC Nielsens as it is done in my [ FMCC ] what we do is we track an overall market share basis 3 large organized players because the data is available. And there today, our market share is 37%.
37%, okay. And similar question on the follow-up. When you have GT modern care and e-commerce is roughly about 2/3 of our business. So would you have been tracking some channel-wise market share in these 3 channels?
We track it but we cannot share it at this time.
No, the question is that where it is deviating from the peak over last 3 to 4 years...
I think...
The common data is available. We are tracking it. We will become #1 soon in some of the channels like Flipkart and Amazon. We are targeting to become #1. It is 1 or 2 quarters away.
Okay. And the last question on the margin story. We are at close to about 10, 11, and we are targeting to go to 18 over the next 15, 18 months' time. What are the levers? And what are the short-term gains and what are the long-term, medium-term gains, which you think? Obviously, supply chain is one of the things which will give you the operating leverage I can understand. But what are the things because of the revival in management, you can fast track that.
So 10%, 11% is not a normal margin. It's an abnormal thing. This is mainly because of low revenue growth. Once we do normal revenue growth, which is upward of 15%, this automatically will become 13% to 14%, which is a normal margin. And from there, I have to grow. And those are a few things, one, premiumization story, which will add a little bit to my bottom line.
The second one is rationalization. So I want to reduce my inventory, as I said, from 829 to 600 once that happens my warehousing cost will come down. I think these 2 things plus rationalization on trade looking at our overall warehousing structure. Those are a few things which I will work on.
Yes, I want to actually reinforce one point. We will certainly not be reducing our product specifications in any way. Quality will only improve from here on. That is a very formed directive from my side.
[Operator Instructions]
We'll take a next question from the line of Nihal Mahesh Jham from Nuvama.
[Operator Instructions]
My first question was that if you look at the growth of Aristocrat over the last 3 years and also see the growth of one of your competitors, is there a case as the market has shifted more towards the value segment? And in that context, maybe wanting to premiumize, just your thoughts on that.
So one, what has happened in last -- post-COVID is that the unorganized sector has moved to organized. That's where you see Aristocrat and our competition doing better than the lower end. Also, the supply chain of China was disrupted and therefore, the organized players took that opportunity. And once a customer is glued on to a branded range, I think the preference is more towards organized rather than unorganized.
The other thing is in the hard luggage, the polypropylene strategy also helps gain market share from unorganized because we were able to provide a product at INR 2,000. So a branded luggage like Aristocrat and others were available close to INR 2,000, even lower INR 1,899 and INR 1,999. And not with the market. So India story is premium story, we are talking about every day there's one or the other article in economic times.
So India is moving towards premiumization. And therefore, I'm also working, so today my highest selling product in any of my lounge if you go, is INR 10,000. I'm upping that to INR 18,000. So by March, April, you will have a few products, which will be -- consumer price will be INR 18,000 that's the journey which I'm starting. And not that Aristocrat will not be focused. It will also be focused, and it will play it's own gain in the place or the market where it exists.
So just to be understanding better, I would assume that the majority of the product range and relaunches that you are targeting would be more in V.I.P. and Skybags, incrementally, going forward versus in Aristocrat?
Nothing like that. We'll have to have relevant across, right? Because Aristocrat is a INR 1,000 crore brand now. So I will have to play my game there also if I have to be relevant.
Understood, ma'am. The second question was that when you're focusing on creating such an extensive range. Will it lead to an increase in inventory? Or would there be more of a batch manufacturing, how to look at the range versus say the inventory next year?
It will not increase the range as we move along.
We're not increasing our range. We are improving our product attractiveness and design...
When we discontinue the old aged products.
So this a number of ranges or SKUs will more of the same or there will be that will be part...
Yes. Plus I'm also working on a reduction in the range because rationalization of product itself is also one of the work which I'm doing now.
Fewer ranges are a much more -- yes, that is the goal.
We have a next question from the line of Jigar Jani from B&K Securities.
So can you give me what is the performance marketing spend in the quarter and the total E&P spend?
It's there in the presentation, Jigar.
Okay. Okay. And any onetime payment to BCV done?
One time meaning, we have -- it's a 12-month contract. So yes, there is a fee paid to them in this quarter as well.
Okay. So this INR 6 crore will continue basically till the time which we have -- say, last quarter. So that in...
Till March.
Till March, okay, okay. And we had announced an incremental CapEx of almost INR 50 crores, I think, last quarter, you had mentioned out of which INR 30 crores was already done. So is that CapEx now over considering we are not adding any new...
[indiscernible] On molds for new designs will continue. However, there is no big CapEx in next 1 or 2 quarters.
Okay. Okay. And so on the freight, when do we actually start seeing normalization in these expenses? Would it be like second half of next year where we could see some normalization in this freight and add new expenses or warehousing expenses, overall?
Yes, because for this, the inventory has to come down. So 1 or 2 quarters. It will take 1 or 2 quarters.
We have a next question from the line of Vivek Ramakrishnan from DSP Mutual Fund.
My question was in terms of -- I can understand where your journey is going in premiumization and India is going that way. How does it -- how do you change the way the consumer sees V.I.P. or Skybags so that it makes the journey from where you are to where you think the consumers should see where it is? It's not just a product or the price, right? So I just wanted to -- what did you -- share a thought...
Skybag -- so one thing I would say that what I've realized after seeing these 20 markets in my first 45 days, is that customer has a short memory. When they visit the store, they find something which is very attractive and they know the brand, they will pick it up. Skybag is known for youth. It's for the Gen Z. So you'll find more colorful. And so there is already a target audience defined for Skybag. V.I.P. is something which we are working on. I agree it's not easy because people consider that it's some old brands. But to change the perception, you will see a lot of new ranges, which are something different will all be in V.I.P. And it's a journey.
But yes, that's a journey which I have to start. I've started already with 2, 3 new launches in lightweight happened in quarter 3 and a lot happening in next 1 or 2 quarters. But it's a journey, but we'll have to talk about it. We'll have to showcase, but brand recall is high, the top score of V.I.P. is the highest in the industry and which is actually almost more than 2.5x of any of our competition. And I have to capitalize it.
We'll take our next question from the line of Harsh Shah from Bandhan AMC.
Neetu, when you spoke about product in terms of design? Does it also mean that we are moving towards more frequent launches of products compared to what previous norm was?
Pre-COVID, we were good. Post-COVID, we had our new launches and the kind of product profile had deteriorated. I'm going to what it used to be pre-COVID refresh ranges multiple times and give something attractive to the consumer first then to get excited about.
I'll also add one thing here that maybe will convince you all. Neetu have been saying all through '22, 2022, 2023. Sorry, yes. That our product needed improvement. She has been saying this. At that time she was the CFO, so she could not directly influence the new product ranges, now she can, she will, she has, she already have.
Okay. Okay. No, no. My question was more in terms of the frequency of new launches, will that improve as well, increase as well?
That's what I said, that it will go back to pre-COVID where we were good. So it will go back to that kind of sequence...
The other sequence we have launched as well as the percentage to products that are launched that succeed all of that will improve.
Okay. Got it. And secondly, since the focus is now on product, design and frequency. And also improving the fill rates. So when do we see our market share, which is now at 37% and go back to the levels they were before?
It should take at least 12 to 18 months.
We did say for previously in the 1980s, we were 80%. So that...
I mean, 45%, 50%, not about -- not that...
45% will happen in 12 to 18, it will take 3 years.
We'll take the next question from the line of [ Manas ] from Kotak Securities.
See, e-comm is picking up overall everywhere. My question is, what percentage of overall sales you see from e-comm going forward?
So currently, it is around 21%. I think it will stabilize around 25%.
Maybe higher, I think.
In Next 2, 3 years...
[indiscernible] Maybe decline.
Yes, 25% to 30%.
To be 30%, we need to take the [indiscernible].
Okay. And within this e-comm, how many would be through your own web channel and how many to will be like through Amazon, Flipkart...
At this point of time, 95% is through portal, ours is very small. However, in FY '25, we'll be focusing on our B2C. Because first, we wanted to put the act together and write and then we work on B2C. So that will be a focus area for FY '25. And incentive like 20% should come from B2C.
Okay. And do you have an active CRM program or you intend to have one?
We have, at this point of time, but we'll definitely have a lot of improvement plans around it. We are also looking at doing something around a loyalty program kind of a thing. But those are my second level priorities.
All right. And one final question, like I saw GC trends going up, right, or stabilizing up? GC, I believe is a guest count, right?
I'm sorry?
What is the GC trends you mentioned in the presentation?
So I said, it's going up. It used to be 49, 50 for last almost 1 year, we are now inching to 55, 56, the gross contribution.
Gross contribution. What about walk-ins that you see in your outlet? Have they improved as such? Is there a way to measure them?
We don't...
I don't think I have that data. We don't measure walk-ins, what we see is a robust demand based on all our key indicators like secondary sales, like passenger traffic, like hotel occupancy, specifically major walk-ins only because we have a very distributed distribution system, the multiple [indiscernible]. So our retail stores are only a small percentage of the total company sales. And we have many different ways to track the second detail other than walk-ins.
Yes, it was 12,000 touch points, and we are only having -- our own stores is only 150.
There's robust demand. GC has robust demand, if that's your question.
We have a next question from the line of Richard D'souza from SBI Mutual Fund.
Just one question from my side is that on the inventory front, what would be your strategy to handle it? And by when do you think we'll have a decent kind of inventory on the books?
By -- yes, it will take 12 months for us to have a reasonable inventory. A lot of work has started, but it is something which is time-consuming. The way...
We do not want to sell at discounts. So that actually adds time to it, but I feel it is a worthwhile time.
Also, [indiscernible] does not have shelf life problems because you remember in the past, you used to use luggages for 7, 10 years. So there is nothing like -- and most of these inventories that I have is 9 to 12 months old, nothing is 1 year and above.
In the previous year, we obviously forecasted a much higher sales growth than what we achieved -- sorry, in the previous 3 quarters. And secondly, we forecasted a lot of soft luggage whereas the marketing too hard or it. So that is why the inventory is so high. However, going forward, with a systematic plan, it will come down. And it will improve supplies of our luggage so that we can also cater to the market.
And we are looking at different GTM strategies for doing that. Like I'm going to the team that I'm not there some such things, which I can't talk in detail in this call.
Okay. Just 2 questions here based on this thing. On the soft luggage thing, while you said that life is not a problem for soft luggage, but is it a matter of concern that maybe the soft luggage, which we have is not what is in demand by customers?
No. Because in soft luggage, there is not much color, design issue like hard luggage and hard luggage you need freshness every time. Soft luggage is standard with a few pockets more or less some products will have 3 pockets, some will have 4 pockets.
The underlying ranges and inventory is good quality. It's not [indiscernible]. The -- if we feel it is slow moving, we can use a range of discounts to make it fast moving. But having said all of that, the key issue, I believe, is the speed to market of forecasting. That needs to improve. So you have given set of inventory and it's up category ranges brand.
So like -- does that mean to the market. And as the market shifts, how quickly can you shift -- we shift. That will be determine this. That's why -- so -- and use the inventory is the concern, don't get me wrong. The inventory and the cash management are concerns, and borrowings are also not desirable. But I do believe that, that Neetu combination of CFO who is the current -- we will definitely address this.
Okay. The second question is on the forecasting front. I mean, we got this soft luggage thing wrong, we got the quantities, which could be sold wrong. How have we corrected this thing going ahead, now that we are looking at premiumization. Do you think that's the way to go? I mean, is there any hardcore data which is telling you that premiumization is the need of the hour? Or is it something which you feel that given your cost structure, you can go below mid-premium segment?
I think it's about responding to the market. We -- I believe there's sufficient premium, mid-premium and value demand. We're lucky in India as that we have so much demand of transforming segments. And so it's about the company's ability to respond to the market demand with good products quickly, what do I mean by quickly, I mean 3 to 6 months instead of 9 to 12 months.
And with the changes in leadership that we had with those changes in leaders, and I mean by starting with Neetu, I believe the pace of decision-making is faster. The frequency of forecast revisions is faster, and the underlying processes underneath these forecasting will improve. So those are the changes I'm talking about. We're also going with the software, which will do a data-based forecasting and then there will be a moderation which will happen.
So Neetu's management style is detail-oriented and granular, and you need that for to we make an excellent supply chain department.
Thank you. Due to paucity of time, we'll now hand over the call to Mr. Neetu Kashiramka from V.I.P. Industries Limited for closing comments. Over to you, ma'am.
Thanks for joining this call. I can only reiterate that have some confidence, a little patience. I think patience is almost over. You'll start to see green shoots soon. And yes, I welcome all of you to come and see the new range, if you want to have more confidence. And yes, please connect with my office and we can meet.
Thank you, and be assured, I think the organization is in the right hands, we are doing everything which is good for long term. And I would say there is no shortcut to success. That's the mantra which I'm following. And definitely, you will start seeing results soon. Thank you.
Thank you, ma'am. On behalf of V.I.P Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.