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Informist, Wednesday, Aug 7, 2024

--Aditya Birla Fashion: Expect greater shift in demand in Oct-Mar

--Aditya Birla Fashion: To open 25 stores in FY25, mostly in Oct-Mar

--Aditya Birla Fashion:Acquisition engine to take pause for some time

--Aditya Birla Fashion:Saw consolidation Apr-Jun, mainly in small towns

By Anjali Singh

MUMBAI – Aditya Birla Fashion and Retail Ltd's net loss narrowed on year for the second straight quarter in Apr-Jun on the back of growth in newer businesses. The market was affected by prolonged heat waves, which reduced consumer activity, the company said. However, the net loss narrowed owing to a refined cost model and improvement in its distribution network, it added. The revenue was largely unchanged from the year-ago period, falling short of the Street's estimate of a rise of 24.6% on year.

The retail company, which houses brands such as Louis Philippe, Van Heusen, and Pantaloons, reported a net loss of 89.7 mln rupees, against expectations of a loss of 2.03 bln rupees. For Jan-Mar, it had reported a net loss of 992.8 mln rupees, against a net loss of 486 mln rupees a year ago.

The Aditya Birla Group company's revenue for Apr-Jun was 29.86 bln rupees, which missed the consensus estimate of 35.53 bln rupees by a wide margin. The revenue was even lower than the lowest estimate of 34.50 bln rupees in a poll by Informist. Sequentially, the revenue rose nearly 5%.

In the post-earnings conference call, the management said it expects a greater shift in momentum to take place in Oct-Mar on the back of a likely improvement in demand during the upcoming wedding and festive seasons. The company, which acquired the Indian Garage Co near the end of 2023, plans to pause acquisitions as its current portfolio is significant enough to build a 10-bln-rupee business, it said.

The company's consolidated earnings before interest, tax, depreciation, and amortisation rose 15% on year to 4.06 bln rupees for the reporting quarter. The EBITDA margin also expanded by 80 basis points on year to 11.8%. The total expenditure, including finance cost, during the quarter was 30.43 bln rupees, compared with 31.11 bln rupees a year ago. The finance cost was higher at 1.79 bln rupees, against 1.65 bln rupees a year ago.

The company said losses increased in the reporting quarter due to the addition of TCNS, which was not a part of the company a year ago. "As far as TCNS is concerned, I think most of the big, deep correction that we are doing in that business is behind us, maybe a quarter more," the management said in the post-earnings call.

Aditya Birla Fashion and Retail's management also said the amalgamation of TCNS with the company and the demerger of Aditya Birla Lifestyle Brands are on track.

SEGMENT-WISE PERFORMANCE

Revenue from key lifestyle brands fell 7% on year to 14.82 bln rupees in Apr-Jun owing to sluggish demand with fewer wedding dates. However, the company's operating margins expanded by 50 bps to 18.8% as a cost reduction programme and initiatives to improve profits were robust.

In the case of Pantaloons, the revenue grew 5% on year to 11.01 bln rupees. EBITDA grew 43% on year on the back of effective markdown management and cost control measures. The operating margin expanded by 470 bps to 17.6% in the reporting quarter. For Pantaloons, strong seasonal performance with improved product aesthetics and design supported growth in the June quarter. The private label share under Pantaloons in the quarter was 66%, and the management plans to improve it.

STORE EXPANSION

The total number of the company's stores in the country stood at 4,167 in the reporting quarter, with a target of opening up to 25 more in 2024-25 (Apr-Mar). Its lifestyle brands opened more than 35 stores in key markets, but as the company shut down underperforming stores, the number of stores fell by seven on year to 2,636 stores. A similar trend was seen in Pantaloons as the number of stores fell to 417 stores in the reporting quarter, from 434 earlier. Apr-Jun was the quarter of consolidation, the company said.

Today, shares of Aditya Birla Fashion and Retail closed 1.3% higher at 323.05 rupees on the National Stock Exchange.  End

Edited by Rajeev Pai

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