Monte Carlo Fashions Limited (MONTECARLO.NS) Earnings Call Transcript & Summary

The next question is from the line of Viraj Parekh from Carnelian Asset Management.

Congrats, sir, for your results. Sorry if I am repeating any questions, I joined the call a few minutes late. Firstly, sir, I wanted to understand, if I look at all our segments, we've delivered decent kind of a volume growth. Even there's been some kind of a dip in realization, average realization. So given that the start of the year has been such strong in volume growth, how do we expect the rest of the year to see, especially when a good monsoon is followed by a good winter? Is there any read-through you are getting in terms of the order bookings for winter you've had in terms of last year's base and this year's base? And just linking to this your annual guidance, do you see it's inching upwards?

Yes. Thank you. So in last con call, we mentioned that we should be growing around 10%, and we stand on that guidance, including the improvement of margins also that we set last time. But now as we moved into this quarter, there is every chance that after the end of this quarter, we may revise it upwards. So we are getting good orders. The sales have been picked up in July itself. So we are very confident that once we end this quarter, there is every chance that we may revise this guidance upwards, including both the margins and the revenues.

So sir, I mean, I just wanted to understand, I mean, cotton is 50% of our business that already this year had a volume growth of around 13%. And there can be an impact of EOSS sale or average realization, I understand that. But given that we are already in that decent high double digit, mid-double-digit volume growth, are we being conservative in terms of revising our guidance next quarter? Or it can go inch upwards of 19%, 20% as well for the year?

I think the exact guidance as far as volumes are concerned, I can give you once we end this quarter because then we have complete figures in our hand of production and for dispatch also. But as of now, what I can reiterate with the confidence is that the guidance which we gave in the last con call, we will definitely super achieve it. We will overachieve it.

Got it, sir. And sir, in terms of profitability, the second question is in terms of profitability. Our expenses are inched a little bit upwards despite having 10% kind of a growth. In terms of profitability, can you give me some color of how should I look at this year vis-a-vis last year? Last year, we around INR 80 crores in PAT. So considering your EBITDA margins, what kind of PAT figures are we looking at for this year?

See, I have not calculated the PAT figures. What we said last time was that there should be at least 100 basis point improvement in the EBITDA margins.

On the base of last year, which is 17%...

Yes. So minimum 100 basis point improvement in the margins, we will see this year. It may go upwards also that only we can let you know once we end this quarter, which is running right now.

Got it. And sir, in terms of the sentiment on the ground, how are you seeing demand in terms of, a little bit of competition has also been there for like the last 1.5, 2 years, increasing competition. How is the demand this year for the industry basis the last 3 months, which have gone back for the year?

I think in last 1 year, if we see, this is the most positive or most optimistic we have right now in this quarter, because there have been some sluggishness, there have been some inflation concerns, there have been some monsoon concerns. So I think all these are behind us. So going into this quarter, we have been very optimistic. And also, as we are approaching with the festival season, Diwali is early, Also, there is a good wedding season ahead. And whenever there is a good monsoon, we see that there is a good winter also. So going forward, in next 2 quarters, we seem very optimistic and very confident in achieving our guidance as well as revising it, it might be at the end of this quarter.

Got it. Sir, last question before I get back in queue, sir. We've mentioned we are opening around 40, 45 EBOs with strategic emphasis on Western and Southern regions. Historically, these regions have been weak for us. And when you're writing the strategic emphasis, can you elaborate in terms of how much of the store count increase in these regions versus what they are as on date?

Yes. Just hold for a moment. So out of, if we open suppose 10 stores in all over India, around 2 to 3 stores will be opening in 25% to 30% in South and Western region. So that is the plan going for this financial year also. And we have seen that the growth in South is more as compared to West. So we may add more stores in South as compared to West going forward.

Got it. So 75% will continue in North and East, only 25% we are looking in West and South, from which 25% more will be skewed towards South?

More towards South because the growth which is happening in South is comparatively better than, I would say, even in the rest of the India because in South in like-to-like, we have grown 17% in this quarter.

We take the next question from the line of Yuvraj Kunwar from Emkay Global.

Could you expand on your partnership with Salesforce, what specific functions are being digitized? And what KPIs are you tracking to evaluate success there?

See, the problem with earlier like service provider was basically, we had a different online and different offline integration with SAP and also with the earning and burning points with the service provider. But the Salesforce integration means that all are like online and offline, they have come at the same platform. So now the customer, which is visiting on our website or they're visiting on our EBOs, so he can convert his point anywhere and customer, and we also know that the customer's history that whether he's purchasing from our EBOs or whether it's from online. So we are integrating every visit in our history sheet, so he comes to know that earlier it was not possible when there were 2 or 3 service providers. So that is the benefit we get from Salesforce. And secondly, there have been some parameters which were not provided by other competitors. In that case, Salesforce has given us a tableau platform, which is their unique platform, which has been provided to us and where we can track each and everything across our stores, across our website and across our customer profiles and across demographies, also in age groups also. So very comprehensive report they provide to us, which is very beneficial for analysis and also take further actions as far as our retail stores and websites are concerned, because they also provide us many database things, which were not provided earlier by another competitor, which were giving us services.

Okay. Okay, sir. And sir, tied up with BlinkIt cities. So I had asked this question last time also for the quick commerce. So what SKUs are you focusing there on those platforms? And what are the initial learnings on say, profitability and customer acquisition?

Right now, the categories which are present in quick commerce is basically, we have given them towels, we have given them T-shirts. We have given just now sweaters. We have also given them bedsheets. So these are the categories and socks also, thermals also. So these are the categories which we have given to them. And we expect at least INR 10 crores sales from quick commerce in this financial year.

[Operator Instructions] We take the next question from the line of Diwakar Rana from Prudent Equity.

Just a follow-up on the guidance part. So sir, what makes you so confident to revise the guidance upwards? So what are the tailwinds are you seeing right now?

It's only the sales because we have seen that this quarter has begun us well and the growth has been above our expectations. So that is giving us the confidence to revise this guidance once we end this quarter, nothing else. And also already, we said that the plan was already there with us for a double-digit growth, which is already we had an order book and all. But seeing the growth and seeing the sales, which is happening right now, so we may revise it upwards once we end this quarter.

Okay. And any headwinds you see in next, I mean, 2 to 3 quarters?

See, I don't see any headwinds as of now because in India, we don't see any impact of this tariff thing, which is going on for exports market because we are present purely in domestic market, even though I see some benefits coming up because if it might happen that there can be some reduction in the raw material if there's a little drop in exports. That is a very, very slim chance, but it's not against us. It is in favor of us. So I don't see anything which is, we only see tailwinds coming us on our way going forward into next 2 quarters. And also, we have seen that because of reduction in the interest rate, reduction in the income tax slabs and all, and also the good monsoon, the rural income, which has gone up and also there are good festive season coming up. So all these things, as of now, it is looking very positive to me. So that is why I'm again reiterating the same statement that we may see that there might be a possibility to revise this guidance upwards in next con call.

We take the next question from the line of Mohit Dodeja from Emkay Global.

Sir, 2 questions from my side. First, I've observed that the footwear sales have seen a sharp ramp up. Is this being a wider range pricing change or any new formats like athleisure? And secondly

It's the increase in volumes as compared to last year. And we see that we should be doubling the sales in this financial year, and it's only mostly the selling 90% online only. It's the formal shoes only. Nothing else, only formal shoes and 90% sales happens online. So it should be doubling our sales as compared to last year.

Okay, sir. Second question is there's a drop in revenue growth of almost 10% in Q1. So sorry, there's a revenue growth of 10% in Q1, but the EBITDA margin has declined to 4.26%. Can you elaborate on the drivers behind this margin compression? And when do we expect margins to normalize?

Please don't see this quarter as a quarter which has to be considered because this first quarter, we get returns, we book our returns at our cost. So when we dispatch it, we dispatch it on wholesale prices. So that impact is always there in last quarter and first quarter of this financial year. So what happens is that in second and third quarter, we normally have a sale of around INR 800 crores. So out of that, around INR 100 crores, INR 115 crores which comes back to us in last quarter and first quarter. So the impact is normally around INR 50 crores, which is mostly divided between last quarter and the first quarter. So first quarter would always historically has been remained like that. But as we move into second quarter and third quarter, we would see everything turning into green, whatever figures you are seeing in red right now would turn into green. And also, we are very confident that the results going forward in second quarter and third quarter would be much better as compared to last financial year.

We take the next question from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to understand regarding our inventory days. And sir, what kind of, sir, what is our inventory levels as of Q1 end? And sir, what kind of improvement can we see in FY '26?

Inventory levels are almost, I think, stable and inventories has gone up because we'll be increasing our sales this year. So by that percentage, it has gone up. So there is no much difference as far as inventory days and debtor days are concerned.

Okay. Got it. Sir, and how is the inventory at our retailer and LFS level? Because I think you mentioned like there has been like companies are moving from the winter segment and the competition is reducing. So there are fewer number of players that will be servicing this. Sir, on the inventory level, sir, do we have any idea of the inventory levels at these Reliance and other large format retailers?

I can give you some information on our own retail channel, where our inventory is lesser as compared to last year's level, around 7% to 9% lesser as compared to last year level. And we see that returns from summer in this financial year are at least 10% less as compared to last year's level. So that is for our own retail channel. But as far as MBOs and SIs are concerned, that is difficult to say because, they give us information only by around 30th of August. But as per the market feedback from our sales team also, their inventory is almost at the same level or even lesser than last year's level. So we don't see returns basically going up in that channel also. And in case of LFS also, the inventory is lesser as compared to last year's level. So if I talk about company as a whole, so you should see that the returns at least decreased by around 5% as compared to last financial year level. [Break]

The next question is from the line of Amit Agicha from HG Hawa.

Sir, what is your targeted net debt to EBITDA and working capital debt reduction strategy? And the second question is like what is your blended cost of borrowing currently? Any plans to refinance [Indiscernible]?

We have only short-term debt. We don't have any long-term debt. It's a debt-free company. We have even INR 300 crore cash on books as of 31st March.

[Operator Instructions] As there are no questions from the participants, I would now like to hand the conference over to the management for closing comments.

Yes. Thank you for participating in this earnings con call, and I hope we have been able to answer all your queries satisfactorily. Even if you have any further questions or would like to know more about the company, please reach out to our IR managers at Valorem Advisors. Thank you very much, and have a great day ahead.

On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.