Khadim India Limited (KHADIM) Earnings Call Transcript & Summary

And what is the kind of athleisure segment contribution during this quarter?

Athleisure contribution, very -- it's at a nascent stage. It would be 1%, 2%, not more than that, but we have increased some stores recently. So we should be able to see increasing numbers soon.

And any specific contribution from the sports shoes for Khadim brands?

Sports shoes, again, the lower price points, sports shoes have done pretty well, actually. In the Pro sub-brand of Khadim. There are some lower price points, which we introduced last year in November. So that has done well, below INR 1,000.

[Operator Instructions]. The next question is from the line of Abhishek Benkar from [ Genetic Capital ].

One of my questions have been answered. But I just wanted to ask, are there any such types like Skechers type in the process? Or are we contemplating there may be some more such types.

We have done another small tie-up, which we didn't mention, but it was quite small. Like for the monsoon season, we have kept -- there's a renowned umbrella brand in Kolkata, so in Bengal. So we have kept some of their umbrellas in our shops during the monsoon season on SOR basis. So that gave some -- like it's miniscule, but yes, we have just kept it so that while monsoon seasons and all people want some umbrellas, they can come and get from our high footfall shops. So we have done that and this.

Okay. Yes. And also what are our expectations from these tie-ups? So these tie-ups will become big in future? Like what is our expectation?

These are mainly strategic tie-ups. I mean whatever products that are missing in our retail outlets. So on that, we are keeping. But the product that we are -- I mean Khadim is providing through its sub-brands, will not go for any tie-up in that segment.

These tie-ups get like a separate set of customers in our store. So some of the objectives are like that. And as -- if the -- we are waiting for the -- see, the first quarter was low because of low footfall, unpredictable weather, et cetera. So let the footfalls come in. If we see a good response, then we have to decide accordingly how much to scale up.

Okay. And also, are you falling into premium segments through our own products? I mean.

Yes. We are -- we have -- like I mentioned in my -- this thing, in my speech also, so we have certain sub-brands. We have British Walker, which is leather shoes. So we have actually launched many designs in that also, those price points. It's not only about the price point, it's crusted leather, British Walker shoes we have launched, natural leather. So these are very premium leather products. These start from INR 3,799 and go up till a little more INR 3,799 plus, okay? So these products, we have launched in select stores. So in British Walker, we have given such products to capture that consumer also that premium consumer. And we have another sub-brand called Sharon in our ladies category, where we have provided a lot of value-added ladies designs with California construction products. So those are also -- have been having a good response for some time now. And now we think the time has come to increase the options in that also in the Sharon products. So these premium stuff we are doing in British Walker, Sharon, Skechers and -- but we also remain focused on volume growth. So we are keeping our prices competitive in cards and providing some discounts when the thing is soft, the demand is soft.

We take the next question from the line of Sucrit D. Patil from Eyesight Fintrade Private Limited.

I have 2 questions. One is for Mr. Burman and this for Mr. Indrajit. So Mr. Burman. My question to you is with demand challenges and profitability improving for Khadim, how are you planning to reposition Khadim for the next phase of growth, especially in Tier 2 and Tier 3 towns? Are you going to explore youth-led designs, digital-first launches or regional influencer tie-ups that can help a strong brand story just beyond price and reach. What is the plan of Khadim for the next Q2 or Q3? I just want to understand that from you.

For Tier 2 and 3 shops, you are saying? -- town. Yes. So for Tier 2 and 3 towns, like I mentioned, we have to be -- it's a little price sensitive, those markets, 3, 4. So for that, we are launching products, like I mentioned, below INR 499 and stuff like that. And yes, we are doing influencer marketing. During any new store is opening, we are doing influencer marketing. If you go and see nowadays, the influencers are focusing a lot on the price point. I mean they are going and saying that you get this at this price point. So they are focusing that so that Tier 2 and 3 people where they are a bit price conscious -- the majority of the consumers, they get that messaging. So that's the thing.

I get the pricing part. My question was particularly, how are you doing the tie-ups with the influencers or the other things which have asked to build a brand? Apart from the pricing part, how is Khadim trying to build its brand, brand image to be very precise.

Yes. Khadim's is trying to build the brand by various ways. So if you see like right now, our festive catalog ads have started in the newspapers. So we are giving -- we are giving a lot of focus on the sub-brands now. We are -- like I mentioned a while back, Sharon British Walker, we are promoting that also in the newspapers. -- along with the traditional -- like there are some ads, traditional catalog ad with price point-driven marketing that we are doing. But while we do that, we are also promoting the sub-brands after a long time stand-alone, like in a stand-alone manner. And we are doing a lot of -- if you walk into our stores now, you will see there's a lot of POP material that is product-oriented POP material that is there in our stores. Like we have got hang scroller show window discussing about this California construction that we are having in our Sharon sub-brand, -- then like the crust leather articles that I said in British Walker, if you go to the British Walker shelf, there is a special focus with POP material showing that then British Walker shoes also has got a comfort range where the insoles are very comfortable. The soles are like a little thick, and it's very comfort broad-fit shoes. So that also we are putting POP material in our stores to enhance the brand, the sub-brands.

Okay. Okay. Fair enough. I get the point. My second question and the final question is to Mr. Indrajit with regards to finance. I believe sir is online today?

Yes, yes tell me.

Yes. So I just want to understand, as you manage cost and plan for growth, how do you -- as a CFO, how do you decide where to invest or deploy major of the capital, say, between new stores or digital platforms and brand campaigns. What is the framework that you follow? I just want to understand that.

See, in regard to the opening new outlet now, we are presently concentrating on the eastern part of the country where the breakeven is reached very quickly and also some parts of southern part of the country where also the brand is fairly present. So at present, we are not considering any expansion in the North and West, where it takes time around 2.5 to 3 years. So we need stores where we are able to reach the profitability in the first year. So that type of stores, we are investing. And in regard to digital thing, yes, we are doing digital activities. It's around the year. We are investing in digital. And also we have shifted our e-commerce business from our own warehouse to Ekart logistics hub from where our return has also reduced from our warehouse, it was around 30%. Now it has come down to 20% to 21% return in e-commerce. And in regard to marketing, yes, we have reduced the marketing cost. But once everything improves, we will do the marketing for both brand building and for ATL and BTL.

Yes, I think that is a good enough guidance for me. And I wish the entire Khadim team best of luck for the next quarter.

We take the next question from the line of [ Darshil Jain from RJ Investments ].

I have a couple of questions. So could you provide more insights into your store addition plans for upcoming quarter and maybe the remainder of FY '26? And specifically, what is the expected number of new stores, maybe a ballpark number would also do. And will the focus be more on expanding company-owned outlets? Or would it be a franchisee-led growth? And also additionally, what factors are influencing this strategy, like regional demand trend?

Yes, yes, I'll take this question. So this year, we are opening less number -- we are opening some company-owned outlets, 10 -- around 7 to 10 company-owned outlets, but more aggressive opening has been planned in the -- we have started this franchisees. We are TFM franchisees. So we are planning more aggressive store launches in that. Like this year, we have already launched, I will not be able to say the number, but we have achieved a good turnover from this franchisee, TFM outlets that we have opened around INR 5 crores of additional turnover we have achieved, okay. The number would be how much? 12, 13 new TFM has been opened through franchisee model. So there, we have added INR 5 crores of turnover till now, and we aim to open many more, like we aim to open many more of this model. This is a model where you send the stock to the franchisee owner, and they have -- they get a commission. And so yes, you have good...

Sorry.

Yes, you have a good -- like the expectation is that by doing this, you'll have a good control over your stock and everything.

Understood. Understood. And my final question is, are there any plans to introduce new product categories or segments like athleisure segment in the coming quarters that could maybe align with the evolving consumer preferences?

Athleisure, we have launched if you talk about clothes and in sports shoes, we have -- in our own -- we have launched Skechers also. And in our own sports shoes also, we have launched a lot of -- we have done a lot of studies, and we have increased our non-lacing range. We used to have like a big quantity of our designs were lacing and non-lacing was a bit less. So now we have increased non-lacing range because that has more acceptance by customer. So non-lacing range and racing range would be around I mean I shouldn't comment on percentage, but we have just increased the non-lacing range also and which also is showing a good response in sports shoes in our brand Pro. And we have launched some sneakers and all, the low price in below INR 1,000 sneakers. That also had a good show. And Waves, we have a brand called Waves, which is basically EVA products where you have all sorts of EVA tong slippers, clogs, these kind of articles have also done pretty well. And we expect this -- we have created actually, if you go to our shops now, you will see like we have really -- we have created a corner for Waves basically, this Waves products, which is basically the EVA thong slippers and all. We have created -- we have done sort of communication, waterproof sort of communication, and we have kept the products there. And we expect this category to do -- continue doing well for several years, next several years.

We take the next question from the line of [ Isha Murthy ] from M&A Ventures.

So in the opening speech, you mentioned that the quarter was impacted by muted demand due to unpredictable weather and global demand. So like could you provide more clarity on how the softened demand environment has played out like across different regions or store formats? For instance, I would say like were Tier 2 and Tier 3 cities more affected than metros? Or did franchisee stores see a sharper decline compared to COCO stores?

We have seen the decline overall, but I mean, franchisee, it will be a little more compared to our COCO stores because primarily since the franchisee is dependent on the stock that they purchase from us, -- since their secondary has dipped, the payment has also become slow. So they have been affected by some stock also. But the degrowth is more in the Tier 2, Tier 3 compared to the metro and mini metro.

So what specific steps are you taking to mitigate the softness in demand like going forward?

See, what we have done, we have given discount, we have provided more articles in discounts so that our stock is also liquidated. And we have seen a good rise in the discount percentage, as I told from 18%, it has gone to 33% -- and this quarter, during the 15th August time also, we have given the discount thing, and we have seen the sale has improved, but the margin will be affected because of discount. But in the festive, we expect that the demand will be increasing, and we will be not providing any discount and also can protect our margin there. So we are eagerly waiting for the festive season, which is very -- which is early this year, particularly in Bengal, the Durga puja is in the month of September. And after that, we have a Diwali and the winter season where the demand is generally higher compared to the first quarter.

We take the next question from the line of Riddhi Vora from SKS Capital.

Yes. So my question is that are there any other partnership or brand tie-ups in the pipeline for FY '26 that the investors should be aware of? And could you share your criteria for selecting such partners, whether it is based on the product category or target audience or some geographic reach?

No. See, we have done certain partnerships, mainly in those areas where we felt that we probably don't have those products exactly. So those areas we have done partnership. And see Skechers has been a big partnership. I mean, Skechers is a partnership where the products MRP is also high. So I consider it a big partnership. But we have some other smaller partnerships. I mean, you can count that as a partnership, but it's like just like the umbrellas. It's just to give the -- have the seasonal demand met, then we have kept -- we keep some VIP school bags, VIP. That's because VIP -- Khadim is a shoe brand. It's not primarily a school bag brand. So the traction of VIP school bags is a bit stronger. So that's why sock sector, we have...

Jockey and Puma.

Jockey and Puma, some sporty socks. So these are the tie-ups which we have. These tie-ups are small, like all these VIP and that Jockey and Puma.

Mainly the tie-ups are in different genres of product, not footwear. Footwear is the first tie-up that we have done with Skechers.

Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I would now like to hand the conference over to Mr. Omkar Bagwe from MUFG Intime IR for closing comments. Over to you, sir.

Yes. Thank you for joining us on the call today. I would like to thank the management for sparing the time and answering all the queries. We are from MUFG Intime, Investor Relations Advisers for Khadim India Limited. For any queries, please feel free to contact us. Thank you, everyone, and have a great day.

Thank you.

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