Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vedant Fashions Ltd (BOM:543463, Financial) reported a revenue growth of 7.8% in Q3 FY '25 compared to Q3 FY '24, reaching INR 511 crores.
- The company maintained industry-leading gross margins of 67.3% and a healthy EBITDA margin of 47.4% during the quarter.
- Profit after tax (PAT) margin stood at an impressive 30.9%, with a PAT of INR 158 crores.
- Vedant Fashions Ltd expanded its retail footprint by adding approximately 50,000 square feet of net retail area, bringing the total EBO area to 1.75 million square feet across 666 stores globally.
- The company witnessed strong recovery in Tier 2 and Tier 3 cities, contributing positively to sales growth.
Negative Points
- The company's overall performance was impacted by a challenging market environment, particularly in Q1 FY '25, which was a non-wedding quarter.
- There was a subdued performance in the nine-month period of FY '25, with revenue growth of only 1.5% compared to the previous year.
- AP and Telangana regions underperformed compared to the rest of India, affecting overall sales growth.
- Rental inflation has been a challenge, impacting the pace of new store openings and expansion plans.
- Footfall growth was lower than expected, with the main delta in growth missing from footfall rather than conversion rates or average basket size.
Q & A Highlights
Q: Despite expectations, the quarter didn't perform as anticipated. What were the headwinds?
A: Vedant Modi, Chief Revenue Officer, explained that the company undertook aggressive marketing and introduced new collections tailored to regional tastes. Competition was not a significant factor, as stores with and without competition performed similarly. However, macroeconomic pressures, particularly in AP and Telangana, affected sales, with these regions underperforming compared to the rest of India.
Q: How are you managing franchise expectations given the current SSSG scenario?
A: Vedant Modi stated that while there is a sense of slowness in openings due to rental inflation, the company is on track with its gross expansion plans. Franchise partners, who have been long-term associates, understand market dynamics and remain satisfied with performance and payback, despite not being as high as before.
Q: Can you provide insights on Mohey's performance and future plans?
A: Mohey has shown significant growth, outperforming company averages. New categories like suits and skirts have seen tremendous growth. The brand's productivity is nearing Manyavar's levels, and the company plans to open more Mohey stores, emphasizing its presence in new and existing locations.
Q: What is the impact of macroeconomic conditions on the ethnic wear market?
A: Vedant Modi noted that while the ethnic wear market has faced challenges, the slowdown is more related to broader mid-premium discretionary spending rather than specific to the category. The company remains optimistic about long-term growth as India becomes more aspirational.
Q: How is the company addressing rental inflation and its impact on expansion?
A: Vedant Modi explained that rental inflation is a challenge, particularly in core markets. The company is cautious about signing new leases at high rates and is waiting for prices to stabilize before aggressively expanding. The focus remains on opening stores at the right locations and prices.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
