Kewal Kiran Clothing Limited (KKCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kewal Kiran Clothing Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Before we begin, a brief disclaimer. The presentation which Kewal Kiran Clothing Limited has uploaded on stock exchange and on their website, including the discussions during this call, contains or may contain certain forward-looking statements concerning Kewal Kiran Clothing Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. Please note that this conference is being recorded. I now hand the conference over to Mr. Pankaj Jain from the management. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for taking the time to join us today. Welcome to Kewal Kiran Clothing Limited Quarter 1 FY '27 Earnings Call. I'm joined today by Mr. Hemant Jain, Joint MD; and Marathon Capital, our Investor Relations Adviser. We are delighted to share that KKCL has delivered another quarter of double-digit growth in quarter 1 FY '27 with strong performance across all key financial parameters despite a challenging external environment. A key highlight of the quarter was a combination of robust volume growth and healthy pricing, reflecting the quality of our growth and the strength of the consumer demand for our brands. Let me take you through the key insights for the quarter. Consolidated revenue for Q1 FY '27 stood at INR 279 crores, registering a healthy 19% year-on-year growth, driven by strong growth in both volume as well as value. Consolidated apparel volumes grew by encouraging 24% on a year-on-year basis, reflecting a strong consumer acceptance and validating our design capabilities and product strength across all brands. Our growth was broad-based across the portfolio, highlighting the strength of our brand architecture and our ability to cater to diverse consumer segments. Kinner continued its sustained growth journey. The brand now operates at 464 exclusive brand outlets with further strengthening its presence across LFS and online channels. SSG growth remained flat during the quarter. Cross delivered another strong quarter with robust growth sales growth and EBITDA margins in line with KKCL. The brand continues to gain traction across MBO, exports, EBO, while our focus remains on improving the working capital cycle. Junior killer continued to gain strong traction across MBO and LFS, validating a focused entry into kids wear. Norman's strategic shift to a D2C-led model is gaining traction, supported by a network of 81 EBOs. Integrity has also delivered encouraging performance and supported by renewed focus and targeted brand building initiatives. Our channel strategy continued to deliver balanced growth across formats. The retail channel grew 29% year-on-year, driven by continued expansion of our EBO network and strong contribution from the LFS channels, particularly led by cross. With non-retail growth was primarily driven by e-commerce segment, which continues to scale as well. In line with our strategy of expanding our retail footprint, we have added a net 4 EBO during the quarter 1 FY '27, taking our total network to 670 as of 30th June 2026. This balanced performance across channels reflects the success of our strategy to strengthen both our offline and online presence while reinforcing our go-to-market capabilities. Profitability remains strong, supported by healthy revenue growth and operating leverage. EBITDA grew 29% year-on-year to INR 52 crores, driven by disciplined execution and operating leverage. EBITDA margins remained strong at over 19%, exceeding our guidance of 17% to 18%, reflecting an efficient operational performance. Profit after tax grew 29% year-on-year to INR 41 crores during the quarter. The continued strong performance of Cross also validates the successful integration of the brand following its acquisition and reflects our progress in expanding the business across age groups and gender segments. Looking ahead, we remain confident of sustaining this growth momentum through the rest of FY '27 and beyond. Backed by a strong balance sheet, a resilient business model and a compelling value proposition, KKCL is well positioned to capitalize on emerging opportunities. Our strategic opportunity -- our strategic priorities remains unchanged, driving design-led growth while strengthening all our brands, expanding our distribution network across MBO, EBO, LFS and e-commerce, maintaining operational discipline to deliver sustainable and profitable growth. We continue to remain committed to our Vision 2028. reiterated earlier, our aspiration is to accelerate our long-term growth trajectory from 15% CGR to a 20% CAGR over the next 3 years. We believe this will be driven by a combination of sustained organic growth and disciplined value-accretive acquisition under our well-defined acquisition framework. While acquisition may not materialize uniformly every year, our 3-year strategic road map has been designed to deliver this accelerated growth strategy. G -- guided by our core principles of sustainability, stability and scalability, we remain confident in our ability to achieve this ambition and create long-term value for all our stakeholders. With this, I would now like to open the floor for questions.

[Operator Instructions] The first question is from the line of Sukrit Patil from EyeSight FinTrade.

I have two questions. The first question at Raymond Jain is, just to understand beyond the regular outlook, what are the top 2 to 3 execution priorities you are focusing on in the next few quarters? And alongside that, what do you see as the biggest risk in consumer demand shifts, fashion cycles or competitive pressures? And how are you preparing to manage them while strengthening KKCL's position in the branded apparel? That's my first question. I'll ask my second question after this.

KKC is going forward looks at making it KKCL as a house of brands. So each brand is positioned in to target a particular targeted customer. We feel that, okay, looking at our current quarter, we feel that, okay, all our strategies, which we had to change in terms of some of the particular brands have got in line and that's why, okay, each brand will be able to deliver that growth as expected.

My second question to Mr. Jain is on the retail side, what are the key priorities you are driving in terms of store expansion, customer engagement and omnichannel presence? And what are the risks you see in demand volatility, distribution or competitive messaging? And how are you preparing to mitigate them?

We have taken a balanced approach so that, okay, there is a growth sustain across all the channels. Maybe some quarters, one of the channels may get impacted, but okay, on an overall basis, most of the channels have been growing uniformly. I would say that general trade, okay, we have been able to strengthen the position in increasing the number of counters so has been the case of NFS the contribution is still lower as compared to other channels of sales. But we are exploring the omnichannel strategy where we can still penetrate the Tier 1 as well as the Tier 2 cities. The EBO -- the current target for our EBO would be around 50 to 70-odd stores for the current year on net basis.

The next question is from the line of Sahil Doshi from Thinqwise wealth.

So firstly, congratulations. I think Cross has been doing exceedingly well and that acquisition seems to be paying off really for us. Just a question on stand-alone performance. If I see for the last couple of quarters, that's been slightly muted compared to the overall business. So 12% growth in this quarter, even last quarter was around 8%, and we were expecting that pickup to happen with the revamp in a lot of the clients, including integrity and government. So can you just give us some color what's happening there? And how do we look at stand-alone performance from here on?

Generally, we said that overall on the consolidated basis, okay, we'll be growing from 15% to 18%. That was our revenue target. I think we have crossed our targets and been able to achieve close to around 19%. You should look at -- not look at on a stand-alone basis. However, if you do so, I think, okay, the Laman and Integrated, as you mentioned, we have changed our strategy, which we said in the last 2 quarters scenario and it started reaping results for us.

Okay. Meaning has the entire integration completed? And -- or are we still midway -- because if I see the stores, Lawman at 90, again, we've pruned some stores.

Okay. It was a balanced approach. As you said, we grew very fast in that channel, okay? And we were okay trying and testing. We have got our formulas right now. I don't think so you'll find this happening in coming quarters.

Understood. Okay. And in terms of the other brand pivots, if we can talk a little more about each of those ambitions as well as brand strategy because I think we were looking to call out a specific -- give out some more detail in the coming years, so that will be very helpful. And secondly, on the office or the land investment, it's been a while now. Is there some clarity on this?

That will Sahil, both the things regarding the pivot as well as the land. Pivot still stays at the rate as it is, okay? We are experimenting. We have not got that formula right. As soon as we do, okay, we'll definitely let you know regarding the same, okay? However, the focus has been there to have a premiumization as well as going down, which is into value retail. When you spoke about the land, that is also in a standstill position, and we are exploring opportunities of development as well as outright sale for the land.

Sure. Any timelines if you want to call out by when we will do a strategic review for both of these because...

I am in talks with, okay, a couple of people, but I cannot give you a deadline until things have been freezed.

Fair enough. And just lastly, in terms of the split of the business, if we see retail versus non-retail, the non-retail hasn't been growing at the same pace as it used to in the past. Is there some -- meaning just generally, wanted to know the industry dynamics? Is that changing? And how do we try and position ourselves there?

Our focus has -- we said that, okay, we are to strengthen our retail position. However, okay, we don't feel that non-retail has not been growing. Definitely for the current quarter, it was below the average of what retail grew at. But I think overall, it should also grow on the same pace.

[Operator Instructions] The next question is from the line of Vaibhav Sethani from TC.

Congrats. So congrats on a great set of numbers. So I have 2 questions. One is on the debt side that our debt continues to rise over the last year. So is it because of our acquisition and higher working capital that we are seeing working capital cycle? And the second one is on our capital allocation policy. So we have roughly around INR 400 crores, INR 500 crores on our balance sheet. So what are our plans around that?

The debt remains almost similar on a quarter-on-quarter basis. In fact, the debt -- in terms of debtors, it has fallen down if you compare on a quarter-on-quarter basis. That's one. Secondly, regarding the capital allocation, definitely, we feel that, okay, some set of cash should stay on our balance sheet. We are still exploring some acquisition in terms of inorganic growth, maybe -- okay, that cash -- the utilization of such cash availability will be in respect of such -- it will help us in [Audio Gap] will help us in while looking at a bigger ticket size acquisition.

The next question is from the line of Mohit Jain from Anand Rathi.

Congratulations on a great set of numbers. Just had a couple of questions from my end. The first one is, how many EBOs are we targeting to open for this financial year?

Target remains at close to around 50 to 70-odd stores.

Okay. And considering we have only opened 4 EBOs in this quarter, we retain the same targets, right?

Yes.

Okay. And how are you seeing...

The opening of stores are generally mostly towards festivals, which is quarter 2 and quarter 3.

Okay. And how do you see the overall market demand in terms of this quarter? How is it coming out?

The market remains challenging. But okay, we feel that on a KKCL portfolio, okay, as the brands are positioned, okay, we'll be able to gain better market share. And we'll be in line to achieve our targets. During the period, we have also done our roadshow for booking for the second season, which is summer and the traction was encouraging.

[Operator Instructions] The next question is from the line of Devang from Varma Associates.

Congrats on a great set of numbers. I have a couple of questions. First is we've already achieved 19% growth in the current quarter and we have been guiding for 15% to 20%. And considering that the festival season demand would be higher or typically the sales is skewed towards festive. Do we want to up our guidance?

We generally don't see on a quarter-to-quarter basis. However, since we have achieved a 19% growth during the quarter on an overall basis also, it is -- we will let you know regarding the revised targets after the quarter two scenario.

Hopefully it is upward only. My second question is on the share of the overall portfolio, which has come down to 9% from 12% Y-o-Y. And if we look at full year basis, from 13% to 9%. So is there any specific trend which we should understand or note. The revenue mix. Sorry, I missed it.

Revenue mixed product. Okay. Revenue contributes to jeans contributes to closer to 50% of the revenue.

Sorry, that's Sir, my next question was on the Gurgaon property monetization. I know you partially answered another person. But it's been some time we have been discussing this maybe more than almost 2 years. We should expedite or put a conclusion to this sooner, right? As an investor, we also there a lot of dilemma, whether it's happening, not happening.

I'm also trying for the same, okay, but we'll let you know as soon as the deal gets completed.

The next question is from the line of Vaibhav Chaitani from TCGANC..

This is just a follow-up question. So do we have any handy number of how much square feet sort of presence we have in terms of the EBO what sort of sales that we make per square foot basis.

Sorry, sorry, I didn't get your question.