Titan Company’s net profit in the first quarter of the current fiscal year (Q1FY25) witnessed a marginal decline despite a rise in revenue, due to expansion among competition. Its consolidated profit after tax (PAT) declined 5.5% year-on-year (YoY) to Rs 715 crore in Q1FY25 from Rs 756 crore in the same period last year.
However, the company is optimistic about the growth in the second quarter on the back of reduced import duty, pent-up demand and its retail expansion plans.
At the same time, amid competitive intensity, Ajoy Chawla, CEO of jewellery division, Titan Company, says there is a need to step up marketing investments tactically, during the earnings call.
“..because of competitive intensity and newer players coming in, we may have to also think of stepping up marketing investments tactically in markets, which may have a bearing,” he said.
He was responding to the query of whether the cost optimisation levers are expected to continue in the coming quarters for the company.
Chawla said, “It’s an ongoing thing because we are constantly alive to the fact that our costs and growth should kind of be in sync. And this is not just for the jewellery business but across businesses.”
Titan’s jewellery business reported a 9% YoY growth in the April to June 2024 period to ₹9,879 crore.
A 20% retail growth was witnessed in the first six weeks of the quarter alone, which included Akshaya Tritiya. Factors including few weddings days, a steep jump in the rates of gold, disturbances due to elections and an unprecedented heat wave across the country impacted overall consumer demand.
Titan’s overall consolidated Earnings Before Interest and Taxes (EBIT) climbed 8.3% year-on-year in Q1FY25 to Rs 1,203 crore from Rs 1,111 in the same period last year. Meanwhile, its profit before tax (PBT) dipped 3% YoY to Rs 973 crore in Q1FY25 from Rs 1,002 crore last year due to financial costs of CaratLane acquisition, which were not a part of the base quarter.
The subsidiary’s (i.e. CaratLane) total income jumped 30% YoY to Rs 832 crore in Q1 FY25, while adding a net of 3 new stores in India during the period.
It is to be noted that CaratLane’s founder Mithun Sacheti sold his 27% stake to Tata Group for Rs 4,621 crore, last year. In June this year, Saumen Bhaumik, who held the CEO position of the EyeCare Division, was then appointed to helm CaratLane.
“Over two to three years’ timeframe, we believe that subsidiary CaratLane should scale up as well as improve the EBIT margin profile,” shared Ashok Sonthalia, CFO at Titan Company.
Retail expansion
Talking about retail expansion plans in the next one to two years, Chawla added, “Our aim is to target around 40 to 50 stores in Tanishq and about 70 to 80 stores in Mia and a substantial similar number in CaratLane. So those plans are on. Further, beyond that, we are not sure whether it makes sense to push aggressively because it’s also a function of our current base.”
He mentioned that, “We are already at a fairly large base, our presence is also very strong across 270 towns, so we will stick to what we think is the right opportunity and ensure the quality of stores that we open are good.”
At the same time, the company is planning to transform around 20 to 30 stores, into significantly larger stores.
Same-store growth for the company stood at around 3% in Q1FY25 and overall growth is around 9%.
International business
The company’s international jewellery business recorded a growth of 92% YoY to Rs 350 crore in Q1FY25.
It is to be noted that in the last year, the company opened a total of 8 new Tanishq stores across multiple locations globally, including 4 stores in the GCC region, 3 in North America, and 1 in Singapore.
Chawla highlighted that while the international business is still very small but it is growing rapidly. On the post-budget announcement and 9% reduction on customs duty, he said, there has been a lot of people who are on the fence who have come in and started buying.
“We are seeing a significant upswing in gold and also in stud. Earlier, there was a lot of fence-sitting even due to elections, and deferred purchases in the first quarter,” he said.
Targeting new and young buyers
The new buyer contribution for Tanishq, Mia, and Zoya stood around 45%, which is just a percentage point lower than last year’s same quarter.
On having witnessed Fastrack volume growth of 16%, Suparna Mitra, CEO of the watches and wearables division of Titan Company, shared that the company has worked a lot on making the product more fashion-forward.
“We had launched a sub-brand called Vyb for young women last year. On the Fastrack brand, things that are working is differentiated products as well as premium products. We’ve introduced premium products like ceramic, and automatics which sell at Rs 10,000, and consumers have lapped it up. So, our product line-up is now much more oriented towards today’s young customer, and that has given us a lot of boost,” she said.
Managing Director, CK Venkataraman, concluded, “Our first quarter performance reflects mixed consumer trends in lifestyle categories. While the inclement weather conditions during the summers, general elections and lower wedding days impacted retail walk-ins, the growth metrics in watches and wearables and eyecare were quite healthy.”