Cantabil Retail India Limited (CANTABIL.NS) Earnings Call Transcript & Summary

No, no, no, no. Can you repeat? I couldn't hear it.

So what I'm saying, immediately after post-Ind AS, other things are not getting clear. So you mail me separately your question, I'll give you in complete detail.

The next question is from the line of Pavan Kumar from Ratna Traya Capital.

Sir, I just wanted to understand why a slowdown in the number of stores that we have added in this particular quarter? And what is the net target for this full year?

So we have opened 24 stores at the gross level, but there are some closures, 18 stores that got closed. But these were majorly the insignificant stores which got closed. So if I do the breakup of 18 stores, 7 were the relocations. Four agreements were they expired where we don't want to renew due to -- because market was in bad shape for some reason. And 7 were the net closure performance closure, which we can say. So net addition is 6 stores, but the area we added is 21,000 square feet. And we plan to add like 120,000 square feet in a year. And so we will surely cover up the gap in the next quarter. We are very confident we will cover up this gap. And we are confident that we will open 120,000 square feet in a year.

Is there any learnings that we can -- we bought out from those store closures? What was going actually wrong? Any kind of feedback on that, please?

No, there is not any strategic mistake this far because expiry used to happen, we have 600 stores. So some stores used to get expired, some markets get outdated. So these things are like normal for us. We don't have any strategic miscalculation due to which store number is high. There was a few stores which were used to get closed on 31st March, but slipped by a few days, so it came into the April month and this quarter. So there is no problem in the strategy and the execution.

Performance based issues are very insignificant.

And what is the breakup between franchise and own stores, sorry?

So 20% are the franchisee stores and 80% are the company stores.

[Operator Instructions] The next question is from the line of [ Thanmoy Roy ], an individual investor.

First of all, congratulations for a great set of numbers. I have -- most of the things have been answered. I just have one thing. So the average revenue per store, I could see some improvement in this Q1, though in the last few years, it has literally go down a little bit. So is this trend you see is going to continue?

So our revenue per square feet has gone down last year was because we have opened bigger stores. In bigger stores, one used to have a less per square feet sales. But our rentals have gone down, our costs have gone down, the EBITDA has increased. Our EBITDA is highest in the bigger stores. So profitability-wise company is going to go further, not go down. And we are trying to improve our SSG. So with the improvement in the area, per square feet sales will also go up.

The second one is like there was some news some days before like that government is trying to reduce the GST for more than INR 1,000 selling price point clothing. So any idea on that or is that going to any help in terms of sales or anything for the business?

Earlier also, it has been there in the discussion, but not been materialized. We don't expect at least for this financial year, any changes there. However, any, then we'll be able to absorb. We don't see any challenge in that.

Sir, this can be beneficiary for us, right, instead of challenge in the [indiscernible]?

Yes. There is cost benefit. So overall, we calculated last year also. So we are almost on the same part, a few percentage increasing, some is getting down because they are planning to increase INR 1,000, 12% rate -- 5% rate as well. So in this financial year, at least we don't expect any changes.

The next question is from the line of [ Shaurya Kalyani ] from [indiscernible] Partners.

Sir, one question regarding you mentioned that you're going to increase your capacity, plant capacity. So by how much it is going to be increased from existing 1.8 million?

Existing capacity, 1.8 million is -- 1.5 million has been increased to 1.8 million. The capacity what we are increasing, it may not be increased in terms of finished goods. Like last year, we completely installed the washing plant. So capacity -- total capacity we want to increase. So total production numbers would be this only. FD numbers would be reduced.

And sir, for -- to achieve around INR 1,000 crores of revenue in FY '27, so around 17%-18% will have to grow this year as well. And assuming like 6% comes from the same sales growth. So are we confident that we'll get a good growth from the new stores, then like 10%-11%?

Yes, the guidance is clear. If you see the first quarter, it's 34% good sales growth. But long-term guidance same because not only from the retail expansion, my e-commerce section, which is 6% as of now, definitely going in next 2 years, 8% to 10%. So the balance 6% to 7% same-store sales growth and balance 12%-13% would be a mix of retail footprint expansion as well as growth in e-commerce segment as well. But new -- also like shoes is newly started, that is giving us a good traction. So that will be increased. So it will be a mix of all.

The next question is from the line of [ Anil Jain ] from [ Equity Fashion Capital ].

My question is regarding per square feet sales. It is around INR 600, INR 600-odd. So if you open a new store, generally, what level of per square feet sales it takes to breakeven store level?

So we get approximately the same kind of the per square feet sales. So this quarter, we have closed at INR 624 per square feet sale per month. So when we open 14 new stores, we target that below minus 10% maybe come because our store used to grow fast in the second year. So -- but there is not much difference, and we are able to break even from the very first year for the new stores also.

Sir, you mean to say that in the very first year, in the latter half of the year, you breakeven at the store level?

Yes. In the first year only, we used to do the breakeven. And the -- basically, the breakeven of the store is dependent upon the rent -- rental also, not just only per square feet sales.

Yes. I'm asking more generally, what is the difference between like your company level same-store sales is INR 600-odd? And you -- we break up the stores between the 2, like 2-year older and new. So what is the per square sales difference between the 2?

Right. So our overall per square feet sale last year, INR 624 is the Q1 numbers, which you are mentioning. The overall sale per square feet is approximately INR 800 per square feet. Now this financial year, we are expecting to increase. However, it's an average. Like instead of per square feet, we need to understand in totality. My average sale per store is INR 1.2 crores. The moment we do not open any store, which has been expected to give even from the first year or max from the second year is INR 1 crores. Earlier also, we mentioned our maturity period for the store is 2 years. So INR 1 crores is definitely -- INR 1 crores or INR 1.05 crores of the sale is crossing in the second year as well. So there's hardly 10% difference in the first year sales, second year, apart from a few exceptional stores, like bigger stores, they are having INR 1.5 crores plus, INR 2 crores plus sale as well. So 10% is a variation hardly in a 1 year, 2 year versus 3 year store.

And in the first quarter, you have grown by 24%. So -- and volume growth of 11%-12%. So are you conservative in giving guidance of 5%-6% because the -- now after a good monsoon and all these like retail expansion and everything. So what's your sense on that?

So overall annual target, we are expecting to be better off of our earlier target, 20% is the target on a year-on-year basis. It should be better off. Q1 is good, 11%. July was slightly challenging, but we'll be able to cover up this month quarter as well. So going forward, in next 3 quarters, 5% to 6% is going to come. So overall, 5% to 6% garment -- target because first quarter is better off, it should be better off finishing by this financial year. So this financial year, 5%, 6%, 7% same-store sales growth and expecting 20% of our overall growth is there.

The next question is from the line of [ Dharmesh Vyag ] an individual investor.

So congratulations on a very good set of numbers. I am invested in the company since last 3 years and very much satisfied with the figures and numbers you are sharing transparently. My question is that, sir, we are doing very good up to the EBITDA level. We are doing 30% constantly. The problem is, I think, below the EBITDA level, we are -- our expense -- interest expense is around 4.8% of the sales. That is also we are maintaining. But our depreciation charges, which is mainly the lease charges is increasing year-on-year. Like in 2022-23, it was 9.4%, then it went up to the 9.9%. And currently it is 11%. So what are we doing to reduce this so that we can increase our net profit levels?

Sir, this is magic of Ind AS, right? It's a really magical thing. So let me explain once again what is Ind AS. So my 28% to 30% of EBITDA is post-Ind AS. That means my rental cost, which is INR 80 crores, the first participant which has been asked, you will not be able to see in my P&L. That has been converted into my depreciation as well as finance cost. However, the company is completely debt-free for last 3-4 financial years, and we do not have any interest cost. So this is the post-Ind AS number of 28% to 30%. However, my real EBITDA number from the business, if I talk about pre-Ind AS number, that is approximately in the range of 18% to 20%. So this depreciation and finance cost, if you plug together, apart from my real depreciation, actual depreciation of INR 21 crores, this is all rental cost due to Ind AS 116 adjustment coming to this one. So my rental cost is not increasing, obviously, only increasing in the ratio of what the new stores we are opening. So Ind AS is actually converting my rental to finance cost as well as depreciation. My real depreciation is INR 21 crores and actual finance cost is almost nil.

So that is what I'm saying that our rental cost is increasing on a higher pace than our sales. And that is why it is not reflecting in the increase of net profit. Like our net profit was around 12% 2 years back. Now it is down to around 9%. So if we can reduce this or if we can reduce the rental, then we can increase the net profit. So what are we doing to reduce the rental? Or we can increase -- we can -- what I think is that we are not leveraging our Cantabil brand for kids and women wear because our -- we are mainly dependent on the menswear. And there is a very large market available in the kids wear also. So I think if we focus on the kids wear, we can increase the per square feet sales and which will reduce the percentage-wise rental. That is my suggestion.

So sir, rentals, as I just explained, my rental cost is actually increasing -- decreasing in last 3 years from INR 130 per square feet, in fact, exact INR 129 square feet to INR 118 square feet this year. So it is because we are opening the bigger format stores now. So per square feet cost get significantly reduced. So actual, apart from Ind AS, if I reduce my Ind AS [Foreign Language] rental percentage from revenue ratio would be balanced between the same range. It is INR 118 we are seeing now.

And my second question is that how we are doing about this new business? Are we publishing the separate figures for that? Or can you throw some light on that?

Which business, sir?

Shoes business, because we started investing in shoes also.

The shoe business, we are majorly doing only online platforms, and we are selling shoes only in our own stores. It means the family stores we have and the bigger stores we have, we are selling shoes here. We are not opening exclusive shoe stores, the footwear stores. So last year, we did around INR 10 crores of the sales for the footwear. And this year, we are -- we will grow further.

And we are showing the quantity increase of around 17% volume-wise. So what was the quantity actually? So 17% is transacting into how much quantity?

So we sold around 1,431,000 pieces in Q1 offline and around 140,000 pieces in offline stores -- online.

Total approximately 16 lakhs for Q1.

[Operator Instructions] The next question is from the line of [ Vikas Mehta ], an individual investor.

Congratulations to the management and all the team of Cantabil for posting good results continuously for last quite a few quarters. So my question is, is the management satisfied with the share price, which is reflecting vis-a-vis the hard work that the management is doing?

Sir, share price?

Correct.

Sir, are you discussing share price?

Yes. What I'm trying to say is, is the management satisfied with the share price of Cantabil regarding -- I mean, comparing to all the hard work that we are doing as well? Is it the correct reflection?

Sir, we deserve better. We deserve better. Honestly, we are underestimated company, and we deserve better is what we feel. Simple.

So the question is, what would the management plan to do in that regard?

So basically, share price is dependent on the market forces of demand and supply and management has no role to play in it. So it will be only by the market. Our work is to do hard work and do better strategy and execution part. So we are doing that.

As there are no further questions from the participants, I now hand the conference over to Mr. Deepak for closing comments.

To conclude, Q1 FY '26 has laid a strong foundation for the year ahead. Our performance reflects the strength of the Cantabil brand, the disciplined execution by our teams and the increasing resonance of our offerings with consumers across India. Importantly, we are progressing well on our Vision 2027, a strategic blueprint aimed at expanding our retail presence and reach, improving efficiencies and cementing Cantabil's position as a dominant force in Indian fashion apparel landscape. Every initiative we undertake is aligned with this long-term vision, and we remain fully committed to achieving it with speed, scale and precision. We thank you all for your time today and for your continued trust and support in Cantabil Retail India Limited. We look forward to engaging with you in the coming quarters as we continue our journey of growth and innovation. We hope we have been able to answer your queries. Please feel free to reach out to our CFO or IR team for any clarifications or feedback. Thank you all.

Thank you. On behalf of Cantabil Retail India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you, everyone.