Brand Concepts Limited (BCONCEPTS) Earnings Call Transcript & Summary

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q1 FY '27 Post-Earnings Conference Call of Brand Concepts Limited. Today on the call from the management, we have with us Mr. Abhinav Kumar, Whole-Time Director and CEO (sic) [ CFO ]; and the management team. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, this is a reminder that this call is being recorded. I would now request the management to detail us about the business performance highlights for the period ended June 2026, the growth perspective and the vision for the coming years, post which we will open the floor for Q&A. Over to the management team.

Yes, Vinay, I'm actually joining from another system. There is some system problem. So we'll just log and we are joining again from another system. Am I audible now?

Yes, I'll just get the recording restarted. Yes. I would request everyone to settle in that room.

Okay. Good afternoon, everyone. Just a lot of introductions. I'm Abhinav Kumar. I'm the Whole-Time Director and CFO of Brand Concepts. And I'm joined with -- on my left, Mr. Kalyan Maheshwari, -- he is President, Finance & Accounts; Ms. Swati Gupta, she's the Company Secretary. And on my right is Mr. Manish Peshwani, -- he is Vice President, Commercial. So welcome, everyone, the FY '27 Q1 post earnings call, and thank you all for taking out time and joining the call. So just giving a summary, we've -- in terms of the revenue, we've grown by almost 11%. Our EBITDA growth is also very good, owing to the revenue and also reduction in certain expenses that I had informed earlier also that we are working on reducing certain overheads, certain expenses, optimizing our resources -- so all that has led to a healthy EBITDA growth as well. The bottom line, the PBT loss has widened marginally. It's, again, continued pressure from higher depreciation, interest cost and other operating investments. Giving an outlook of the -- from the sales perspective, we have been consolidating in most of the channels, focusing on the sustainable better margin growth rather than just chasing a higher top line. So there are certain consolidation exercises that we had undertaken and very happy to share that things are going as per plans. One major restructuring that we've done is in our e-commerce where certain high-volume SKUs were realigned to certain channels. This is pertaining to a long-term strategy of sustainable growth. And hence, momentarily in this quarter, we would have probably suffered some tent on our primary billing. However, our secondary continue to be strong. So very confident that we should be able to bridge this gap in the coming quarters. Even in terms of modern trade, our focus is more on -- focusing on high throughput counters where we -- are healthy at the bottom line. There still seems to be a lot of challenges in terms of pricing pressures and new incumbent players coming into our category, specifically when it comes to the travel gear category. The pricing pressure still remains to be there. External conditions are not very, very buoyant. At the same time, it is further fueled with war situations, which have escalated the cost of raw material also to go up. At the same time, curbing travel or reduction in travel is being seen. However, in spite of all of this, we are very, very happy and proud to share that we have not lost market share basis. We've not lost market share. There are a lot of bigger companies in the premium space, who have lost actually market share to new incumbent players, but thankfully, our company has not lost any market share. So which is a very silver lining in the this thing. Another thing is we have been consolidating our bag line. Last time also, I had mentioned that we feel that single monobrand stores are going to be more healthy for us. So we've been consolidating on the bag line. We've closed down certain stores, which were not profit making, which were the bottom end of the thing. So long story short, in retail, every now and then, you need to clip your tail. And we've successfully undertaken that whole activity of keeping down the tail so that we remain profitable. The focus is on optimizing the balance sheet, optimizing our resources and very confident that we are in good -- with this, we can open the session for Q&A.

[Operator Instructions] We'll take the first question from Ankit.

This is Ankit Kanodia from Zen Nivesh. So I really admire your philosophy of not going with what the general D2C players are doing in the market. Just wanted to understand, given that they have the financial muscle power and the way we have shared in our presentation about expanding to categories where probably we are entering into those categories where these guys are not there because they are majorly into -- I've been to some of their stores. They are majorly into luggage and most of their luggages are sold through e-commerce at hefty discount. So is it right to assume that increasingly, our revenue will have more share of non-luggage items going forward?

See, I believe it's not that our luggage will not grow. We foresee that or we are very, very optimistic that even our luggage business will grow, right? In fact, as a matter of fact, from Q1 to -- from the last Q1 to this Q1, we have, in fact, grown in luggage, right? But the growth is probably low single digits growth in luggage. Overall, travel care, we are sort of in negative, but not because of luggage, because of backpacks where certain SKUs we needed to consolidate certain high volume but low throughput or low margin items were sort of -- we had to take a call and discontinue a few of them. But otherwise, it has been growing. But to answer the question in a broad way, luggage will keep on growing. I don't see a [indiscernible] reason for that. But current trend is that discounting is the way to lead, right, with all these new players coming in and sitting on a lot of private equity money, the idea is to grab market share from their side, right? They want to grab market share at -- even if the pricing is unsustainable, even at that price, they want to grab that market share. We haven't taken that route yet, and we don't intend to take that route. We don't want to do anything which is at unhealthy pricing. Our new hard luggage plant gives us the opportunity to compete with a lot of these players at a fair price -- market price, right? So that is the route that we are taking backed by [indiscernible] our manufacturing, we'll be able to compete better in the market. And -- but apart from this, the other categories, we see strong momentum, and hence, we keep pushing on it. So I believe going forward, it's not one category getting marginalized over the other. I think we'll see a combined effect of all the categories coming together.

Yes. That was very helpful. My next question is, see, we have our advantage in terms of manufacturing. But when it comes to sales and especially sales channels, the two big sales channel, which we have, one is the modern trade and the other one is e-commerce. And I think it is very difficult to escape the competition there from these D2C players. And if they are in the game of reducing their price point, how do we manage to still follow our philosophy of not going down that ladder of reducing price and yet manage to increase our sales. That is an area which I'm unable to figure out.

So if I tell you, for example, in terms of travel gear, if I talk about modern trade. So if I talk about, for example, Shoppers Stop, our growth this year from last year has been upwards of 12%, right, at the secondary level. Primaries, we are -- as I said, we are trying to optimize every counter. So if there is excess inventory anywhere, we've been trying to optimize all of that. But our secondaries continue to be strong. See, the biggest challenge that one has in travel gear versus the other categories. So now there is a luggage available for as low as INR 900, right? So the question is how will we be able to sell a luggage for INR 8,000, INR 9,000, right? Now if I take a parallel example of, for example, the apparel category, there are shirts available for INR 200 also, right? You get a round-neck T-shirt in Decathlon for as low as INR 300, INR 400, and it's a decent quality T-shirt. It's 100% cotton, decent quality T-shirt. But then you -- people are ready to pay INR 1,500 to INR 2,000 for a U.S. Polo T-shirt. They're ready to pay a INR 3,000, INR 3,500 for a Tommy Hilfiger T-shirt. They pay INR 8,000 for a Hugo Boss T-shirt. So it's about -- it's not only about buying that product, it's about the perceived value of buying a brand, right? Sadly, in our category, specifically in travel gear category, nobody has focused on or let's not talk about anybody else. I'm saying consumers are still not that brand savvy, right? The brand penetration is still at a very low percentage level of the entire consumer base. But today or tomorrow, this is bound to happen. Today -- you might -- the -- you might shift -- a consumer might shift from unbranded to a branded buying a branded INR 1,500 or INR 1,200 luggage rather than buying an unbranded. But eventually, all these consumers will aspire to grow ahead, right? And touch wood, if I talk about, for example, Tommy Hilfiger, we've launched some high price point, premium price point products. We've launched products at INR 32,000 a set, set of 3. We've launched product at INR 27,000, INR 28,000 a set where the competition is selling your mass brands are selling at INR 4,000 to INR 6,000, INR 8,000, even your new age players, premium brands, they are also selling for INR 12,000, INR 13,000, INR 10,000 for a set. And our top sellers by volume also, in our top sellers, the INR 27,000 set, the INR 32,000 set comes in our top sellers. So I would say that consumer today is very, very discerning. He understands the value that they're getting. So if at the premium end of the market, I believe there is still a resilience which the consumer has. And I think we should be able to capitalize on that.

My next question was related to -- see, ultimately, any retail business which has retail stores like ours, they report SSSG, same-store sales growth. Any idea or any plan of doing that? I think our presentation is very detailed. I should congratulate you and your IR team for those details. But if you can just include SSSG also as a metric, I think that would be very helpful.

We will. We will. See right now, what is happening is we are also -- as I said, this year is a year where we are also looking at certain consolidations clipping of our tail. So once we've done all of that, I think we'll be in a much better position to share that information with all of our investors. And I've always maintained -- all of us had Brand Concepts. We maintain that transparency, so I don't have an issue in sharing that. So we will probably going forward, but give us a couple of quarters, and we should start sort of putting our metrics together so that we are able to give you guys the correct picture on same sales -- same-store growth.

Great. Sir, one last question before I go back to the queue. In our presentation, in one of the slides, we have clearly highlighted Phase 1, Phase 2, Phase 3. Phase 1 is the foundation building, which is already done. Phase 2, which is the platform expansion, which we are under. And Phase 3 is the operating leverage. I'm not asking for a definite guidance, but conservatively speaking, [Audio Gap] how many quarters down the line do you expect us to move into the Phase 3?

I think Phase 3 would happen if I speak conservatively, about 1.5 years from now.

We'll take the next question from Naysar Parikh.

So first of all, I just wanted to get your update on the Tommy Hilfiger license.

Yes. So I think there is a delay from the international counterpart. But we have been promised our business plan, everything is approved. So if I can actually mention this that we've got an assurance from the India team. Even the India team has not received their renewal. So as soon as they receive -- it's Tommy International giving the rights to Tommy India, giving the license to Tommy India, Tommy India giving the license rights to us. So the license rights of Tommy India is also not done yet. But I'm given to understand it is just a paperwork, and we are very, very confident that our business discussions, business plans, all of that is already done and closed.

And last time we had a 3-year license, and you had mentioned that this time you will try for a longer 10-year license. So just from a broad contractual perspective, in terms of both the duration as well as the terms like royalty, et cetera, where does it stand? What will be different and same?

Yes. So okay, I can officially on record say this that our 10-year business plan, royalties, figures, numbers have been closed. So it's just the paperwork that we are waiting.

And the royalty will be -- is there any step it will be same.

Same.

Got it. Okay. My second question is on manufacturing. Now it's been, I think, maybe a year plus. So just where do we stand in terms of our utilization? How much share are we doing in-house outsourced? And we were expecting margin benefits to obviously come in. So if you can give us a bridge kind of thing to say that how much benefit has come in and how much of that we have had to pass on to the channel, either as pricing or discounts? That will just give a sense of the manufacturing benefit.

See, so it's at the first phase of manufacturing, we set up the PC unit. And very happy to share that we are already at 80% plus sort of utilization of that. Currently, the entire thing is internal consumption, right? We have yet not started producing for external clients. The second leg of the manufacturing investment was on PP plant, one PP machine, right? So we've taken one machine at the moment. And that also, as we speak, trials are done. We are beginning with the production. By -- at best in the next two months, I think we should reach 75%, 80% capacity over there also. So to put in perspective, the PC unit has about 25,000 kind of production capacity. And same would be a PP, right? So both together would be about 50,000 capacity. Today, we are operating already at a 20,000 capacity plus. And by October or latest by November, we should start reaching about 40,000 pieces a month. In terms of margins, we are seeing a benefit. In fact, if I internally, we do an SBU kind of this thing. I'm very happy to report that the plant is positive at a 20,000 level itself, which we had earlier anticipated that will take at least 30,000, 35,000 units for the plant to sort of breakeven or make money. But we've been able to do that in 20,000 pieces itself. In terms of what sort of EBITDA -- see, it becomes very difficult because it's all internal, right? So it's all internal consumption. So how do you take this? How do you -- what do you load over there and what do you load over here. But I believe that at 40,000 pieces, I think the plant individually, if it was not supplying to brand concepts, we would have easily made between 11%, 13%, approximately 12% kind of EBITDA at the plant level. That gets passed on to Brand Concepts. How much are we passing on to the -- in terms of pricing, I would say a bulk of it today to stay relevant, to get this thing right, we are passing on bulk of it in terms of our pricing to the end consumer at the moment. But I believe once things start to settle down, see, there are 10, 15 new players who have entered who are currently flushed with money, everybody is clamoring for growth. But do you think all 15 of them are going to survive? They're not. So it's a matter of time. Rationalization will start happening in terms of pricing, and that's when we will also start seeing the true benefit.

Right. My next was in terms of like just like you said, they are flushed with money, right? And in competition, if we are sitting with debt and whatever our EBITDA is completely going into interest. So our operating cash flow investing, we are completely negative. Now to what extent can we sustain this? At some point, we are already closing stores as we speak. So what is our capital plan? Because we can't assume they will run out of money in 12 months, maybe even we will. So what do we do? Like what is our plan over the next two years in terms of the capital?

See, even if you look at last year, Naysar, our Q1 was negative. But we ended the year at a positive bottom line, right? Or I would say, let's call it a breakeven. You just, I think, around INR 1 crore plus. But this year, Q1 negative does not mean that my rest of the quarters are going to be negative. right? So as I said, we've taken some consolidation exercises, which is a temporary sort of -- or you call it a short-term sort for a hit that we've taken. But I'm pretty confident that we'll be ending up very healthy this year. So in terms of cash running out or money running out, I don't see that happening because I think we've already bottomed out. From here on, our working capital cycle is going to go better. From March to Q1 itself, our stock has come down. So we have almost INR 4 crores to INR 5 crores of inventory, which has come down stockholding, which means that INR 5 crores extra cash flow has come into the system. So I think we have enough and more leverage. Right now, I don't see a point of -- neither we are short of capital nor I foresee that we would need a lot of capital. Yes, whatever debt was available at that time, we have taken that debt to fund the growth. And I think we have healthy margins, which we'll be able to cover this debt. From a long-term perspective, probably once we are absolutely fine, we are absolutely good, we also aspire that probably five years down the line, we'll be a debt-free company. But that's a long-term vision that we have. At the moment, I don't think money is a constraint where we will not be able to sustain. Closure of stores is not because we don't have money, closure of stores is because those stores were draining money. So we're cutting on all our losses.

No, no, fair. Sorry, just if I could just follow up. What I meant is that do we plan to get some more firepower because from -- we might be breaking even, but from an operating cash flow, we are obviously negative. So do you have any capital raise plans? Do you think infusing some equity -- does that help to give us the firepower to actually fight and where we are more in a growth mode because obviously, we have a bunch of brands that we have taken. So just from that perspective, I'm asking that does capital pose a constraint to growth, which otherwise you would have done if you had more capital?

No. So we did -- the promoters have already infused money when we needed the capital for new brands, and it was primarily taken for new brands. And we infused INR 20 crores of promoter capital. Out of the INR 20 crores, I think INR 15 crores is already into the system. So when we required, we funded it. And promoter himself putting in the capital goes to prove that we are absolutely confident of the story of how we're going.

We'll take the next question from Resha Mehta.

I hope I'm audible.

Yes.

Yes. So on the consolidation [indiscernible], if you can just talk about that for each channel, when did we begin this consolidation journey? And how far are we into -- let's say, are we nearing completion of the consolidation in each of these channels? And yes, maybe I will ask my second question after this.

Good. Do you want to ask the second question right away or?

No, I'll wait for your response. So probably it will be more of a follow-up.

So see, every channel, retail as a business or I would rather say every business, it's a cyclic process, right? So you have expansion, expansion comes in and then you have some consolidation. And then you -- once you consolidate and then you again get into an expansion rate. So it's not about one particular channel that we are consolidating. It's across all the channels, right? So we've had a good run for the past three to four years. We've expanded into multiple stores, multiple categories, multiple channels. But we are not a company which is chasing only top line growth, right? We're very, very focused that we need to have a healthy balance sheet. We need to have a healthy bottom line. And in order to do that, every channel will have some super heroes and some villains. So you need to clip the villains every channel. So we take that as an exercise. And we keep strengthening ourselves. So there might be a particular -- for example, in e-commerce, there might be one particular SKU, which might be giving you INR 10 crores, INR 15 crores of revenue. But you feel that somewhere that SKU has now outlived its age. You want to change that because as a brand, you need to have that health check also in place, correct? So you have to take those calls for -- you might have to let go of some short-term benefits. But keeping the long term in mind, you will have to take those calls to protect the brand.

Sorry, Abhinav, my question was actually in terms of the time lines. I appreciate the reasoning behind the consolidation. I think it was mentioned in the presentation also. Like when do we start off this consolidation journey? And how far away are we from nearing completion in each of these channels? And also in terms of -- yes, and also in terms of your retail stores, so I think the number of closures are pretty sizable, right? And with new additional nine stores on notice. So when do we see this consolidation coming to a closure across channels? And probably then can we expect growth to come back? So that really is the context of asking this question.

Yes. So we embarked on this, I think, last year, Q4 onwards, January onwards, we started sort of -- we said this season, we're going to take on the consolidation -- so we've started on that. And I think we are almost -- at the moment, I can safely say and Manish or Mr. Maheshwari can actually comment on this. But I think we are almost 80% through, 75%, 80% through.

Yes. By September [Foreign Language] stores, we have decided we'll be out of it.

So by September, I think we should be through with this. e-commerce, as I said, we've already -- whatever new listings that we have to take, we've already taken that. So hopefully, from this month itself, we are now sort of getting back on track in e-commerce, certain old redundant SKU styles have been done away with channel strategy is in place. So e-commerce, we are getting back within this month itself. We're starting to see the results. And from a modern trade perspective, I think by September, we should be done with all of this. Then going forward, it will always be a continuous process, but it will not be at a scale probably that we've done it right now.

Understood. So which means that at a company level, we should probably get back to growth October onwards, broadly speaking?

Yes. Yes, 100%. I would like to see it earlier than that. But yes, by October for sure. Your voice is not clear. We can't hear you Resha. [Technical Difficulty]

Meanwhile, we'll move to the next participant. We'll take the next question from [ Randeep Pal ].

So my question is regarding the 19 stores, which will get closed. So how much would be the impact on top line? That is my first question. And we had earlier discussed about INR 1,000 crore top line...

Sorry. So one was on the impact of the closure of these stores. And second?

Yes. We had earlier alluded about INR 1,000 crore top line over four, five years. So are we on track on that target? Or we are need to recalibrate?

So answering your first question, Randeep, whatever figures that we report are post all these closures and everything, right? So now one advantage that we have is we have a very healthy mix of the channels. So for example, our EBO business overall, all the stores put together was about 10% of our overall business, right? So even if we close a few bottom stores, the impact on the overall revenue is not going to be so high, number one. Number two, while we are closing the bottom ones, we are also opening new ones. We are still opening new high throughput area stores. So -- for example, just giving an example of a new brand Off-White. We opened one in Bangalore, and we've already opened one in Delhi. And touch wood, the initial response of our Delhi store is fabulous. It's giving us very, very good numbers. Even the Bangalore store, though our floor, the entire mall is not operational, a few brands yet need to come in. But we've been consistently giving good numbers -- getting good numbers in that store. So I might have closed a store which might be doing INR 5 lakh, INR 7 lakh of sales a month, but I've added a store which is now giving me INR 30 lakh sales a month. I've added a Delhi store, which on a weekend is giving me INR 15 lakh a sale. So it's always a combination. We've always taken a policy that whatever we are doing, we will obviously inform it to the consumer. So don't get this thing by the fact that, oh, the company is shutting down 10 stores, what will happen? I think the previous gentleman also was this thing that [Foreign Language] nothing of that sort. So -- and we are very much on track to that INR 1,000 crores journey. No [ deterring ] from that.

Okay. Yes. It makes sense. And my next question is you have mentioned that you have not lost any market share at company level, but have we lost any market share at brand level like Tommy Hilfiger versus [ Abhunjungal ] or Mokobara.

No, no, no. Tommy, in fact, has -- overall pay -- we've remained flattish. But if I see my ASP growth is better, probably volume, there might have been some low minus single-digit negative, but ASP level probably we've grown, and we are retaining the market share. Only place where I think we've not done to our true potential is, and I'm being very candid and open about it, is yet Benetton. We've had a couple of strategies that we tried and which has not worked well for us. We've already revisited those strategies, pivoted ourselves and we're going on a new path now when it comes to Benetton. So Benetton, we've seen a degrowth in our primaries. But I'm very confident that this year, we'll be able to turn that whole business around, and we should be back on -- we've covered for whatever lost opportunities.

Okay. And my last question, Abhinav, is that since you are cutting the long tail, so currently, our inventory days is around 300. So what's our target inventory days? Like our competition mostly has around 120 days, right?

300 days [Foreign Language] -- we had INR 128 crores of inventory at March end. Currently, we have about INR 123 crores by June end. So it's about 130-odd days of inventory, sir.

Okay.

We'll take a follow-up question from Ankit.

Sir, when I compare our quarterly results with the other larger listed players, what I see is that the seasonality is a little different in our case compared to them. So they have generally Q1 as their best quarter and Q2 is their weakest quarter. And in your case, it is just the reverse. I think Q1 is the weakest quarter and Q2 is the strongest quarter. Why it is that? And is it going to remain like that in the subsequent quarter as well?