Analyzing...
MR. MOHIT DODEJA — EMKAY GLOBAL FINANCIAL SERVICES Page 1 of 10
Ladies and gentlemen, good day, and welcome to the Monte Carlo Fashions Limited Q1 FY' 26 Eamings Conference Call hosted by Emkay Global Financial Services Limited. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone, Please note that this conference is being recorded.
I now hand the conference over to Mr. Mohit Dodeja from Emkay Global Financial Services Limited. Thank you, and over to you, sir.
Good morning, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today, Mr. Sandeep Jain, Exceutive Director; Mr. RK. Sharma,
and Ankur Gauba, Company Sccrctary.
T shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.
Very good moming to everyone, and thank you all for joining us for today's camings call to discuss the performance for the first quarter of financial year '26. Let me brief you on the financial performance of this quarter. For the first quarter under review, the company reported an operating income of INR139 crores, which is an increase of approximately 10% on a year- on-year basis. The company reported an EBITDA loss of INR6 crores. The net loss stood at INRI6 crores for this quarter. The online scgment continues to be a strong growth driver with online sales showing significant growth, especially by our own website. Brand-wise, Rock it also maintained its growth momentum and the home textile segment also performed very well. A major highlight was a 100% increase in footwear sales in Q1 with continued growth cxpected in coming quarters.
With a focus on expanding retail presence, we have opencd 3 new exclusive brand outlets for Cloak & Decker and taking the total to 15 outlets. We remain on track to reach 35 stores by year-end with each store ranging between 500 to 1,000 square feet.
And as a part of our broader plan, we remain focused to open Monte Carlo 40 to 45 stores across India with a strategic cmphasis on the Western and Southern region. To improve speed and convenience, we have partnered with Blinkl, Swigey, and Zepto for 30 minutes delivery. We have also initiated a strategic collaboration with Salesforce to cnhance operations, customer experience and long-term loyalty through a digital transformation.
And now we open this floor for question-and-answer session. Shall we start with the Q&A. Yes.
Please proceed. Page 2 of 10
My first question is on the sales retums and rebatc and discount part. So, it has increased in this quarter. So why is that increased?
Sale returns are, I think L, around INR1S crores increased in this quarter. Basically, in the last quarter, I think it was a littl less. So overall increase of INR7 crores, not that much. And that also because sales have also increased. So, I thirk that going forward, in next quarter and another quarter, we don't find any returns from the previous year sales. Rebate and discounts are basically almost stagnant.
Yes, it has increased from INR112 to INR137. So, this is kind of; it is normalized?
In terms of percentages, if you see it is stable.
And sir, next question s on the MCFL Ventures object change. So, it has been changed, T think. So what are your plans there?
We have planned to invest in solar and rencwable and also in logisties warchouses. So that is our plan because we have seen that the refurns what we are getting in another sister concern company, it is almost 20%, 25% on ROL So that is why this venture has been established. This subsidiary has been established. Any proposed investment?
Already, we have 2, 3 investments in plan, and we'll let you know in another quarter, I think, in next con call, once we have this quarter ended, we can discuss on this. There arc good proposals coming up for this, which can increase owr ROI and also the rate of refurn substantially from the present one.
Okay. And sir, what will be the average price of all our products? And what is the average ticket size per buyer? Do you have that metric?
Yes, just please hold for more. Summer is INR1,100 ASP and winter is around 1,500 ASP, the net realized value.
Okay. And the average ticket size per buyer, you have that metric?
It only for retails we have. Ifs around INR3,500, but not for the MBOs and other businesses.
Okay. Okay. And sir, I just want to reconfirm the guidance that you gave carlier. So the guidance was around 10% to 11% revenue growth and margin 19%. Are you still maintaining that guidance?
We might revise it upwards after this quarter. As of now, we stand on this guidance, but there is every chance to revise it upwards once we end this quarter.
Okay. So revision can come in both revenue or margins or just in revenue? Page 3 of 10
Both in revenue and margins, we might see an upward trajectory. But as of now, we stand on the guidance which we gave last quarter.
Okay. And sir, just 2 more questions. So you have given the geographical split in the presentation. So I would just want to know the split on the rural, urban and semi-urban part.
We don't have it right now, but I can ask our CFO and they can provide you, you can mail them.
Okay. Any number you have, sir, I don't want an exact number. Any broader mumber you can give?
No, I don't have any information on this as of now because I can camy it. But you can definitely ask our Investor Relations agency, they can provide you.
Okay, sure. And last question on this, sir, any plans to export to UK. post this FDA sign?
We have started owr online exports to Europe and to Middle East, but that mumber is substantially less as of now. But as of now, I think we arc getting many queris. So once we have more queries come up, as of now, we arc shipping from India to Europe and to Middle East. But we may open our warchouse after seeing the response in the next 6 months.
The next question is from the line of Shivang from Emkay Global With the new kind of technology now at 15 stores and target of 35 by year end, what arc the KPIs in terms of, let's say, footfall ASP comversion rate indicating about store productivity and scalability?
Sir, your voice is not audible. Can you please repeat this question? And can you please speak a little slowly... Sure. Is it audible now?
No, it's still same. It cracking. There is an echo in your voice. So we are ot able to hear you dlearly.
Yes. With now at 15 stores and a target of 35 by year-end, what are the carly KPIs in terms of footfall, ASP indicating about store productivity and scalability?
We are sceing a per square feet sale of around 6,500 square fect, which is going o go up to 7,500 per square fect as of now. And it's basically the first 15 stores were almost a test launch.
Out of that, I think 4 to 5 stores already we have 1 year with us. So the response has been encowaging. And also the franchisces who have opencd these 15 stores, some of them are opening another, they are adding another stores also for Cloak & Decker in different arcas.
So I think that this brand has a lot of potential because being in an cconomy segment and also which caters to mass segment, we sce a lot of potential going forward. But this year, we have a Page 4 of 10
Vi j Parekh: plan to take it to 35 stores. And then definitely, after 35 stores next year, we may add another 50 stores in this.
The next question is from the line of Arya Patel from Emkay Global.
Tjust had one question. So you plan to add around 40 to 45 EBOs in FY 26 with a major focus on westem and southern part of the country. So just wanted to know what is the CapEx target for this expansion? And when do we expect the operating leverage from the expansion to start kicking in?
No, no. Basically, 90% of the stores, which we open are the franchise stores where we don't have any CapEx. It is only we supply the goods against bank guarantees or deposits. So, and normally, for a franchise, the ROE happens in 3 years' time. It's only 5% to 7% stores, which we open company-owned where we do CapEx. So that is not substantial.
And what would be the CapEx per store for those 5 to 77 It's approximately INR2,000 per square fect depending upon the square fect arca.
The next question is from the line of Viraj Parekh from Carnelian Asset Management.
Congrats, sir, for your results. Sorry if I am repeating any questions, I joined the call a few minutes late. Firstly, sir, I wanted to understand, if T look at all our segments, we've delivered decent kind of a volume growth. Even there's been some kind of a dip in realization, average realization. So given that the start of the year has been such strong in volume growth, how do we expect the rest of the year to see, especially when a good monsoon is followed by a good winter? Is there any read-through you are getting in terms of the order bookings for winter you've had in terms of last year's base and this year's base? And just linking to this your annual guidance, do you sce it's inching upwards?
Yes. Thank you. So in last con call, we mentioned that we should be growing around 10%, and we stand on that guidance, including the improvement of margins also that we st last time.
But now as we moved into this quarter, there is every chance that after the end of this quarter, we may revise it upwards. So we arc getting good orders. The sales have been picked up in Tuly itself. So we are very confident that once we end this quarter, there is very chance that we may revise this guidance upwards, including both the margins and the revenucs.
So sir, [ mean, I just wanted to understand, I mean, cotton is 50% of our business that already this year had a volume growth of around 13%. And there can be an impact of EOSS sale or average realization, I understand that. But given that we arc already in that decent high double digit, mid-double-digit volume growth, are we being conservative in terms of revising our guidance next quarter? Or it can go inch upwards of 19%, 20% as well for the year? 1 think the exact guidance as far as volumes are concerned, I can give you once we end this quarter because then we have complete figures in our hand of production and for dispateh also. Page 50f 10
But as of now, what I can reiterate with the confidence is that the guidance which we gave in the last con call, we will definitely super achieve it. We will overachieve it.
Got i, sir. And sir, in terms of profitability, the sccond question is in terms of profitability. Our expenses are inched a little bit upwards despite having 10% kind of a growth. In terms of profitability, can you give me some color of how should I look at this year vis-a-vis last year?
Last year, we around INRS0 crores in PAT. So considering your EBITDA margins, what kind of PAT figures are we looking at for this year? See, T have not calculated the PAT figures. What we said last time was that there should be at least 100 basis point improvement in the EBITDA margins.
On the base of last year, which is 17%...
Yes. So minimum 100 basis point improvement in the margins, we will see this year. It may go upwards also that only we can let you know once we end this quarter, which is running right now.
Got it. And sir, in terms of the sentiment on the ground, how are you secing demand in terms of, a ltle bit of competition has also been there for like the last 1.5, 2 years, increasing comptition. How is the demand this year for the industry basis the last 3 months, which have gone back for the year?
Tthink in last 1 year, if we sce, this is the most positive or most optimistic we have right now in this quarter, because there have been some sluggishness, there have been some inflation concerns, there have been some monsoon concerns. So I think all these are behind us. So going into this quarter, we have been very optimistic.
And also, as we are approaching with the festival scason, Diwali is carly, Also, there is a good wedding scason ahead. And whenever there is a good monsoon, we sec that there is a good winter also. So going forward, in next 2 quarters, we scem very optimistic and very confident in achieving our guidance as well as revising it it might be at the end of this quarter.
Got it. Sir, last question before I get back in queue, sir. We've mentioned we are opening around 40, 45 EBOs with strategic emphasis on Western and Southern regions. Historically, these regions have been weak for us. And when you're writing the strategic cmphasis, can you claborate in terms of how much of the store count increase in these regions versus what they are as on date?
Yes. Just hold for a moment. So out of, if we open suppose 10 stores in all over India, around 2 to 3 stores will be opening in 25% to 30% in South and Western region. So that is the plan going for this financial year also. And we have seen that the growth in South is more as compared to West. So we may add more stores in South as compared to West going forward.
Got it. So 75% will continue in North and East, only 25% we are looking in West and South, from which 25% more will be skewed towards South? Page 6 of 10
More towards South because the growth which is happening in South is comparatively better than, I would say, even in the rest of the India because in South in like-to-like, we have grown 17% in this quarter.
We take the next question from the line of Yuvraj Kunwar from Emkay Global.
Could you expand on your partnership with Salesforce, what specific functions are being digitized? And what KPIs are you tracking to cvaluate success there?
Sce, the problem with carlier like service provider was basically, we had a different online and different offline integration with SAP and also with the caming and burning points with the service provider. But the Salesforce integration means that all arc like online and offline, they have come at the same platform.
So now the customer, which is visiting on our website or theyte visiting on our EBOs, so he can convert his point anywhere and customer, and we also know that the customer's history that whether he's purchasing from our EBOs or whether it's from online. So we are integrating every visit in our history sheet, so he comes to know that carlier it was not possible when there were 2 or 3 service providers. So that is the benefit we get from Salesforce.
And sccondly, there have been some parameters which were not provided by ofher comptitors. In that case, Salesforce has given us a tableau platform, which is their wique platform, which has been provided to us and where we can track cach and cverything across our stores, actoss our website and across our customer profiles and across demographies, also in age groups also.
So very comprehensive report they provide to us, which is very beneficial for analysis and also take further actions as far as our retail stores and websites arc concerned, because they also provide us many database things, which were not provided carlier by another comptitor, which were giving us services.
Okay. Okay, sir. And sir, tied up with Blinklt cities. So I had asked this question last time also for the quick commerce. So what SKUs are you focusing there on those platforms? And what are the initial leamings on say, profitability and customer acquisition?
Right now, the categories which are present in quick commerce is basically, we have given them towels, we have given them T-shirts. We have given just now sweaters. We have also given them bedsheets. So these are the categorics and socks also, thermals also.
So these are the categories which we have given to them. And we expect at least INR10 crores sales from quick commerce in this financial year.
We take the next question from the line of Diwakar Rana from Prudent Equity.
Just a follow-up on the guidance part. So sir, what makes you so confident to revise the guidance upwards? So what are the failwinds are you seeing right now? Page 7 of 10
It only the sales because we have seen that this quarter has begun us well and the growth has been above our expectations. So that is giving us the confidence to revise this guidance once we end this quarter, nothing clse. And also already, we said that the plan was alrcady there with us for a double-digit growth, which is already we had an order book and all. But sceing the growth and sceing the sales, which is happening right now, so we may revise it upwards once we end this quarter. Okay. And any headwinds you sce in next, I mean, 2 to 3 quarters?
Sce, I don't see any headwinds as of now because in India, we don't sce any impact of this tariff thing, which is going on for exports market because we are present purcly in domestic market, even though I sce some bencfits coming up because if it might happen that there can be some reduction in the raw material if there’s a little drop in exports.
That is a very, very slim chance, but i's not against us. It is in favor of us. So I don't see anything which is, we only sec tailwinds coming us on owr way going forward into next 2 quarters. And also, we have seen that because of reduction in the interest rate, reduction in the income tax slabs and all, and also the good monsoon, the rural income, which has gone up and also there are good festive scason coming up.
So all these things, as of now, it is looking very positive to me. So that is why I'm again riterating the same statement that we may sce that there might be a possibility to revise this guidance upwards in next con call.
We take the next question from the line of Mobit Dodeja from Emkay Global.
Sir, 2 questions from my side. First, I've observed that the footwear sales have seen a sharp ramp up. Is this being a wider range pricing change or any new formats like athleisure? And secondly Its the increase in volumes as compared to last year. And we sce that we should be doubling the sales in this financial year, and it only mostly the selling 90% online only. It the formal shoes only. Nothing else, only formal shoes and 90% sales happens online. So it should be doubling our sales as compared to last year.
Okay, sir. Second question is there's a drop in revenue growth of almost 10% in Q1. So sorry, there's a revenue growth of 10% in Q1, but the EBITDA margin has declined to 4.26%. Can you elaborate on the drivers behind this margin compression? And when do we expect margins to normalize?
Please don't sec this quarter as a quarter which has to be considered because this first quarter, we get returns, we book our returns at our cost. So when we dispatch it, we dispatch it on wholesale prices. So that impact is always there in last quarter and first quarter of this financial year.
So what happens is that in sceond and third quarter, we normally have a sale of around INR800 crores. So out of that, around INR100 crores, INR115 crores which comes back to us Page 8 of 10
in last quarter and first quarter. So the impact is normally around INRS0 crores, which is mostly divided between last quarter and the first quarter.
So first quarter would always historically has been remained like that. But as we move into second quarter and third quarter, we would see everything turning into green, whatever figures you are seeing in red right now would turn into green. And also, we are very confident that the results going forward in second quarter and third quarter would be much better as compared to Inst financial year.
We take the next question from the line of Madhur Rathi from Counter Cyclical Investments.
Sir, T wanted to understand regarding our inventory days. And sir, what kind of, sir, what is our inventory levels as of Q1 end? And sir, what kind of improvement can we see in FY 1262 Inventory levels are almost, I think, stable and inventories has gone up because we'll be increasing our sales this year. So by that percentags, it has gone up. So there is no much difference as far as inventory days and debtor days are concerned.
Okay. Got i. Sir, and how is the inventory at our retailer and LFS level? Because I think you mentioned like there has been like companics are moving from the winter segment and the comptition is reducing. So there arc fewer number of players that will be servicing this. Sir, on the inventory level, sir, do we have any idea of the inventory levels at these Reliance and other large format retailers?
Ican give you some information on our own retail channel, where our inventory is lesser as compared o last year's level, around 7% to 9% lesser as compared to last year level. And we sce that returns from summer in this financial year arc at least 10% less as compared to last year's level.
So that is for our own retail channel. But as far as MBOs and SIs arc concerned, that is difficult to say because, they give us information only by around 30th of August. But as per the market feedback from our sales team also, their inventory is almost at the same level or even lesser than last year's level So we don't see retums basically going up in that channel also. And in case of LFS also, the inventory s lesser as compared to last year's level. So if I talk about company as a whole, so you should see that the returns at least decreased by around 5% as compared to last financial year level.
The next question is from the line of Amit Agicha from HG Hawa.
Sir, what is your targeted net debt to EBITDA and working capital debt reduction strategy?
And the second question is like what is your blended cost of borrowing currently? Any plans to replenish the net returns?
We have only short-term debt. We don't have any long-term debt. It's a debt-fiee company. We have even INR300 crore cash on books as of 31st March. Page 9 of 10
As there are no questions from the participants, I would now like to hand the conference over to the management for closing comments.
Yes. Thank you for participating in this camings con call, and I hope we have been able to answer all your queries satisfactorily. Even if you have any further questions or would like to know more about the company, please reach out to our IR managers at Valorem Advisors.
Thank you very much, and have a great day ahead.
On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconneet your lincs. Page 10 of 10