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

Ladies and gentlemen, good day and welcome to Cantabil Retail India Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions]. Before we begin, a brief disclaimer. The presentation which Cantabil India Limited has uploaded on the stock exchange and their website, including the discussion during this call contains or may contain certain forward-looking statements concerning Cantabil Retail India Limited business prospects and profitability, which are subject to several risks and uncertainties and the actual result will materially differ from those in such forward-looking statements. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Bansal, CMD of Cantabil Retail India Limited. Thank you and over to you, sir.

Good afternoon, everyone. On behalf of Cantabil Retail India Limited, I welcome anyone to the Q1 FY '25 Earnings Conference Call of the company. Joining me on this call is Mr. Deepak Bansal, Whole-time Director; Mr. Basant Goyal, Whole-time Director; Mr. Shivendra Nigam, CFO; Ms. Poonam Chahal, Company Secretary; and Marathon Capital, our Investor Relations advisers. I hope everyone had an opportunity to look at our results. The presentation and results release has been uploaded on the stock exchange and our company's website. FY '25 has started on a positive note with the company delivering a double-digit volume growth of 18.5%. The company also achieved a positive SSG. This growth, despite a lower wedding season demand and heatwave conditions, specifically in North India, demonstrates the trust of our customers in our business model and the brand. We see a strong demand rebound with onset of festival season in Q3, followed by wedding and winter season. We are confident that this business is very well poised to shift gears and deliver substantial value to customers and shareholders going forward. I'll now hand over the [Technical Difficulty]

Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnect them. Thank you. Thank you for patiently holding. We have the management back on the call.

Yes. Thank you, sir and a warm welcome to everyone. Coming to the financials, stand-alone performance highlights for Q1 FY '25. Revenue from operations for Q1 FY '25 grew by 14% to INR 127.9 crores as compared to INR 111.8 crores in Q1 FY '24. EBITDA for Q1 FY '25 also grew by 14% and stood at INR 39.4 crores as compared to INR 34.4 crore in Q1 FY '24. EBITDA margins for Q1 FY '25 stood at 30.8% similar to Q1 FY '24. PAT for Q1 FY '25 stood at INR 11.4 crores as compared to INR 12.3 crores in Q1 FY '24. PAT margin for Q1 '25 stood at 8.9%. With a firm belief, we opened 11 stores during Q1 FY '25. With this, the store count as on 30th June, stands for 544 retailer stores, out of which 414 were the COCO store and 130 as a franchisee-owned stores. The total retail area, what we serve is 6.8 lakh square feet. With the approval of the Board, we appointed -- Board has approved M/s. Walker Chandiok & Co LLP as our statutory auditors. We may now begin our question answer session. Thank you.

[Operator Instructions]. The first question is from the line of Rajesh Sharma from Anand Rathi Group.

Good afternoon, sir. Am I audible?

Yes, please.

Yes sir. So sir, I had just 2 main questions. So what would be your volume guidance for next year? And what growth are we expecting? And is there any specific reason for increase in depreciation this year?

Okay. So volume guidance for overall year will depend on our turnover. So what we have been predicting, the same. Last year, we made a volume of approximately [ 60 lakhs ]. So this year in the same ratio in our sale, which would be approximately 15% to 18%, should grow as well. As far as depreciation is concerned, this depreciation is mainly on account of Ind AS 116 because last year we opened more stores, company-owned stores. Earlier, we have been maintaining approximately 50 to 55 company-owned stores. Now last year, we opened 85 company -- 84, in fact, company-owned stores. So this Ind AS impacted slightly more on the PAT as well. So that is what the main reason is.

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

Sir, just a couple of questions. A follow-up to the first answer, which you mentioned in terms of the volume growth. Out of this volume growth of 15%, 18%, how much do you see coming from SSG? And how much do you see coming from the new stores, if you can give some sort of a guidance on the SSG as well as the new store growth?

So despite the market conditions, we have registered a positive growth in terms of same-store sales. So this year also, out of this 15% to -- 15%, 16% overall growth, 4% to 5%, we can say would be expecting from the same-store sales growth and balance is coming from the new stores as well as slight increase in the e-commerce share.

And how -- what would be the target by the end of this financial year in terms of the store count?

Same. Approximately 70 to 80 stores we are targeting. First quarter was slightly on a lower side due to properties. So 11 has already been opened. So at the end of the day, we should be ending at approximately 70 new stores for the financial year.

Okay. And sir, sorry but just a very, very fundamental question and this is more from an understanding from your business model perspective. Where do you as management aspire to be? Do you want to be on the likes of the value retail chain aspect of the retailers or someone like the premium retailers like a Shopper's Stop or the Lifestyles of the world? So where do you see Cantabil Retail standing between this entire grid?

Yes. If we see like our average selling price for a product is around INR 1,040. So we are neither in the value format, nor in the premium segment. So we call our -- us at the mid-premium segment because ASP in the value segment is around INR 500, INR 600 and the premium segment ASP of the product is around INR 1,800 and we are standing at INR 1,040. So it's between the both formats and the we call it mid-premium segment.

[Operator Instructions]. The next question is from the line of [ Jatin Chawla from RTL Investments ].

A couple of questions. So one, you said that you're expecting growth from 3Q with the festive season. How are you seeing things right now in 2Q? Is it still -- are the market conditions still tough and should we expect a similar sort of quarter, flattish SSG kind of quarter?

Yes, there will be marginal growth. It will be something like Q1. So that's why we are saying that a major change will be coming from the Q3 onwards only.

And for the full year, you're still then targeting 4%, 5% SSG, which will mean that in 3Q and 4Q, you actually need like almost like 10% SSG. Is that something that looks realistic?

See, yes, in Q3 because wedding rates are more, so we are hoping that SSG will be quite good in Q3. So and Q4 also had many wedding dates in January, February. So we hope that business will be really good in those times to cover up the backlog of the first 2 quarters.

Got it. Got it. Sir, related question. When I look at your revenue per square feet, that has fallen significantly over the last 2 years from like almost INR 730 per square feet to now almost close to INR 625, INR 630 and that is obviously pushing -- putting pressure on your margins. How do you plan to arrest this decline that you are seeing on revenue per square feet because you're opening larger stores, so the SSG number is not looking that bad. But when I look at revenue per square feet, that number is kind of falling significantly?

Yes, our store size has increased. Last year, our average store size we opened was 1,600 square feet. And this time also on first quarter average store size was 1,400 square feet, which we opened and company average for size is 1,250 square feet. So we are opening stores bigger than the company average. But we have checked the retail cost of the family stores, family stores and the bigger stores have a retail cost lesser than what the men's stores or the men's and ladies stores having. So though the per square feet sale is less but at the same time, retail cost is lesser than the smaller formats. So they are in the -- we can -- sorry?

No, no, sorry. Sir, go ahead. But just, I have a follow-up question [indiscernible]

We can conclude that profitability is better in the bigger stores, though the per square feet sale is less, profitability is higher in the bigger stores.

And when you say in a family store, your costs are lower, what elements of costs are lower? I would assume with a larger store, it could either be same or slightly higher.

Rental per square feet is going down, like we have a average rental per square feet of INR 128 last to last year. And last year, our average rental per square feet came down to INR 122. So when companies take a bigger property, the per square feet rental used to fall.

Got it. Got it. And other operational costs like rent, employee and?

They also have a impact. So it's the same thing. Same thing. Once your revenue coming down, so obviously, your per square feet cost in terms of mainly to the rentals is visible as well as salaries.

The next question is from the line of Piyush Ahuja from Congruence Advisers.

Just wanted to understand the demographic in terms of age of our overall customer base and the reason behind the stickiness of our customer as we have 50% repeat customers.

What I understand you want to understand the customer profile, basically, right?

Yes. Demographics, in terms of age group.

Demography is like a bigger range. So we are -- we have a demographic something between 20 to 45 because we are majorly into the basic fashion, so all kinds of customers come to us. It's, the young customers also coming to us and the middle age customer also coming to us. So it's a bigger bracket of the age group.

And the reason behind the stickiness of 50% repeat customers?

So this is a phenomena which is seeing in the last few years. The 50% is the old customer and 50% are the new customers. So old customers are the ones who have purchased any time by at least once in the Cantabil -- from history. So that's how we are calculating the data.

Sir, just wanted to ask the reason behind the stickiness, customer stickiness.

So that's why I said, that is showing the strength of the business as well. Now it's a very fine balance for the Cantabil is concerned because this is not only important to have old customer repeat as well as new customers. So we have been, analyzed this number in the last 4, 5 years. Earlier, my number was, 3 years back, was 44% repeat, then [indiscernible] increase. So it's a good chance that's a new expansion happening, new customer is adding as well as new repeat is then. So that is what the -- as far as reason is concerned, brand for the Cantabil is quite acceptable.

[Operator Instructions]. The next question is from the line of Prathamesh Dhiwar from Tiger Assets.

On the geographical front. So in coming time, are we planning to tap South markets.

Sorry, your voice is -- we didn't get the question. Can you repeat?

Yes, am I audible?

Yes, now.

Yes. My question was on the geographical front. So I think mostly we are present in the upper side of the India. So in coming time, are we looking to expand our more stores in South?

Yes. In the near future, we are not planning to go to the South India. Maybe after 2 years, we plan to go to South India. So right now, we are planning to expand in the current territories only.

I missed it. Again, what's our guidance in terms of revenue and EBITDA, for FY '25.

So FY '25 same. Overall, we are targeting to have a growth in terms of revenue approximately, as just I answered earlier question, 15% -- 16% to 18%. And by this, we are maintaining our gross margin and watching, very close monitoring the gross margins and then we should be able to back on our EBITDA margin, reinvest approximately 17%, 18%, which post Ind AS 116 you can take 27%, 28%. We are targeting these numbers.

The next question is from the line of Palash Kawale from Nuvama Wealth.

Sorry, if I'm repeating. I had joined the call a little late. So how do you -- how many stores do you plan to open in this year?

We plan to open like 80 to 85 stores in the current financial year. And in the first quarter, we have opened 11 stores. So rest will be coming in the next coming quarters.

And sir, our SSG been positive, so our -- ours -- is it that our sales are not related to wedding days -- number of wedding days and that doesn't affect us because a lot of players have said that has really affected their revenues this quarter?

Wedding days affect us because we used to sell suits, blazers and definitely, when there is wedding people used to buy shirts, trousers and other kinds of things for gifting also. So if wedding dates would have been more in the last quarter, then definitely our SSG have been better than what we have given.

Okay. And sir, do you expect the pickup, like, are you witnessing a sequential pickup, month-on-month pickup in SSG in the upcoming quarters also in Q2? Or how do you expect SSG to turn out in H2?

So it's too early to say because only 1 month has passed. July was a positive SSG. So let's see, by the end of quarter how it goes.

Okay. And sir, if I look at your segmental breakup, how do you see this women, kids and accessories contributing in, say 2 years from now because our contribution from all these categories is increasing. So how do you see this panning out in the next 2 years?

Yes. Like our contribution from the ladies category was 10%. So we -- from the 2 years, it will come to 15% and kids category can develop because it's a very small, 2.5%, so kids category contribution can double in the next 2 years.

Oh, that's really good to know, sir. And all the best for the future.

The next question is from the line of Shrinjana Mittal from RatnaTraya Capital.

Just a couple of questions. So one is that for -- how do we do our calculations for same-store sales growth? And what is in the denominator, what stores do we take, like which were opened like 2 years back or 1 year back, how so how is the math? Can you explain that please?

So same-store sales growth is purely on the pro rata basis. The stores which like opened in between the last to last year. If like a store has been opened in last to last year June, so it was for the 9 months. So this year also we calculate for the 9 months only. So it's not that the store has opened in the middle of the year. So we take this year comparison with the full year sales. We automatically reduce that much months from the -- that sale of the store.

So for June '24, like for this quarter, for example, in the denominator, the stores would have been opened, like when would they have been opened? .

Last year, simple, the stores which has been opened, say, in the month of May, then only the month of May and June last year as well as May, June sale of this year has been considered. So last year versus this year.

Okay. Okay. Got it. So 1-year old stores. Okay. Understood. And on the e-commerce side, Shivendra ji, can you please share like what was the share of e-commerce in this quarter sales?

So this year, this -- out of this total revenue, we have a INR 7.13 crores of the -- slight increase of 10%. Last year, it was approximately INR 6.5 crores. This year, in this quarter, it has been done, so INR 7 crores.

Okay. And what was it for the -- for Q4 FY '24 e-commerce sales?

Q4 FY '24?

Yes.

I need to just recall that number, that is approximately INR 9 crores, I think. I need to just recall those numbers for that, specifically for the quarter last year. I'll just let you know.

Yes, yes, no worries. And just one more question. So for -- like it was asked previously as well, so for wedding days, what percentage of our sales gets affected because of the wedding season, like in terms of the mix, the suits and all? So how -- what percentage of our sales gets impacted? .

So the 3 categories, suit, blazers and the waist coats, which are directly related to wedding contribute 15% of the Cantabil sales. But yes, we cannot ignore the shirts and the trousers for the wedding season sales also. So in the range of 20% to 25%, we can easily say, the wedding season contributes.

The next question is from the line of Rajesh Jain from Jinanand Research.

I have a couple of questions. First is like, we have recently added footwear. Here, I would like to know how is the response. And how many stores do we have currently? And what is our future plan for that? My second question is related to the breakup of COCO and FOCO stores and the targets for current and the next year, sir?

Footwear stores, last year we did was INR 2.6 crores. And this year, we're targeting the footwear sales of INR 10 crores. Last year, till last year, we were into -- we've put footwear into the 60 stores. Now we have put it into the 90 stores in the company. So and regarding the COCO and the FOCO stores, 414 stores are the COCO stores and 130 is the FOCO stores.

Okay. What is the target for current year and next year, in this breakup?

So it will be again, the FOCO stores will be between 20 to 25 and rest will be the company stores.

[Operator Instructions] The next question is from the line of Yash Bajaj from Lucky Investments.

Sir, you -- just, in answering one of the previous participants, you mentioned that you're opening new stores with bigger stores. And they are relatively much more profitable because of the rental savings. So my first question is that, is the profitability you're seeing today for these new stores, are they profitable at a lower sales per square -- much more profitable at a lower sales per square feet versus the company average? That's my first question.

So what I understood about your question, whether overall profitability, there are 2 things, what I understood. #1, we can look at the numbers in percentage or we can look at the number in totality, right? So once we are looking in percentage, obviously, slightly on a percentage side would be down like per square feet sale. But at the same time, per square feet cost is also coming down. So on a totality basis, on a EBITDA level at the company, company level EBITDA would obviously high once we are opening the bigger stores.

Okay. Okay. So but -- okay. And my second question is that, the new stores which have been opened, at what additional sales per square feet they can go versus the current numbers?

So it's the same thing. Now the overall -- because when we have been looking the history of our per square feet, we are not trying -- saying it is more because earlier the store size was less. So now, like just giving an example. We have a very exclusive stores in Delhi itself of 1,300 -- 3,700 square feet, right? So when you go to per square feet, slightly number. So it is too early to, going forward 3 to 4 years, how much will be the reduction in per square feet. We are trying to increase it. So overall, it would be maintained around this figure, on an annual basis. On an annual basis.

The next follow up question is from the line of [ Jatin Chawla from RTL Investments ].

The question is linked to, I think, something that we discussed on the last call as well that last year, you opened very few franchisee-owned stores, most of the stores were company-owned. And your response was that while we were opening stores in Rajasthan, where the brand was strong, you were getting a lot of franchisees who are willing to open stores. So are we seeing any sort of that kind of traction in any other state? We are expanding a lot in U.P., for example, or any other state, where we are seeing that franchisees are now coming forward and willing to open more stores because you've said, this year you're looking 20 to 25 stores for coming from the franchisee route.

See, Cantabil from the very beginning has been a company-owned store kind of format. Between -- around 2016 to we even closed the franchisee format. We came back with the franchisee format around 2018 only. So right now, the most of the company stores we are doing are doing very well. So when we open company store our profitability and EBITDA margins are also high. So -- but yes, if there is any good option with the franchisee, definitely, we go for it because there is no meaning of losing a good opportunity. But yes, the traction which Rajasthan has is -- we are -- not there in the other kind of markets. And we, frankly, are not targeting many franchisee stores also. But yes, good options from this quarter also. We opened 2 new franchisee stores. But they were good options and doing well. So franchisee will be overall between 20 to 25 only. That's why I said it will not be increasing -- I give lesser figure only because 25% we have. So it might come down but it won't increase.

And this 20 to 25 franchisee stores, are you looking at any particular state where these might come up or...

No, it will be scattered everywhere, not in any one particular state.

Understood. Understood. So where I was coming from was, franchisee is going to come and ask for a license to open only when the brand in that region is strong. So if we are seeing any particular state where there are a lot of franchisee requests that at least to me, tells me that the brand is finding strong traction in that state.

No, it's nothing like big brands -- franchisees are not coming. We can say the brand is weak. Brand is doing very well in most of the markets. And only the Rajasthan has the maximum franchisees. Brand is much stronger in Delhi and we don't have any -- much, except 1 franchisee in Delhi. So it's a matter of trend also, one state's sequence starts building up with the new franchisee. So that's it. I don't see like franchisees not coming from any states or brand is weaker there. We are doing good in the territories we are holding today.

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

I had a fundamental question regarding our business. Basically, if I talk about this Q1 of FY '25. Our same-store sales growth was 1.2%, while our volume growth was 18%, right? So if I say, we are boosting our business by the means of adding stores while our same-store sales growth are like flattish or similar kind of thing. So if we reach kind of saturation point in any state, so what will be our plan to increase our sales, if I say we are on flattish mode on same-store sales. Just, so in that situation, if the base effect comes out, so how we will take care of that?

So right now, what we have seen, the stores which are coming or near the expiring, their lease terms are getting completed. So we are taking the bigger stores. So -- and it is giving very good reward to the company because when we are opening a bigger store after the completion of 9 years lease, our sales can increase multifold. So that's how we are planning to increase the sale in the states, which have gone near saturation. And no particular state literally go for saturation. There are always some opportunities coming up in the states which look to be saturated. So yes, the company will be keep growing in the territories that we are strong and the new territories will definitely company will grow where we don't have presence.

But if I say in Delhi, we are at 56 kind of number in stores, yes, right? So we can say, are we at a saturation point in Delhi? Or is it wrong to say?

No, we are not near saturation point in Delhi NCR. Like we have opened a -- recently opened a Kamala Nagar store, which was around 700 square feet and we have now increased it to 3,800 square feet. And we are repeating the same thing in Lajpat Nagar where store was around 550 square feet and we have taken now 2,000 square feet. So it is then -- we are planning the same thing in many other markets also in Delhi. And new markets are also, we are tying up like there was a Moti Nagar market which has come up in Delhi. There is many new markets coming up in the NCR, especially in the Noida and the Gurgaon regions. So that's why I said there's no territory comes to near complete saturation.

The next question is from the line of Aldrin Viegas from Jinanand Research Analyst.

I had a few questions. Firstly, with the business growing, do you have any plans to get into Athleisure as a segment? That would be my first. Also, what's the contribution of non-apparel to the total business? And what is the per square feet sales that we are targeting for current year as well as for next year? Yes, these are my questions.

So we have been into the activewear in the last year only we have introduced the activewear and the activewear category. So -- and our per square feet sale was INR 800 last year and we are targeting a 5% increase in the per square feet sales. So that was for the same-store signing. And we know apparel business accessories contribution in the total business is 5%. So that's the number and we hope it will also increase.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Deepak for closing comments.

I would like to once again thank all of you for joining us on call today. We hope we have been able to answer your queries. Please feel free to reach out to our CFO, or IR team for any clarification or feedback. Thank you all.

Thank you.

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.