Stanley Lifestyles Limited (STANLEY.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Stanley Lifestyles Limited Q1 FY '26 Earnings Conference Call hosted by Emkay Global. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Dodeja from Emkay Global. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Sunil Suresh, Managing Director; Mr. Sharath as the new Group CFO. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Good evening, everyone. Welcome to the Stanley Lifestyles Limited Earnings Conference Call for the first quarter ended 30th June 2025. The earnings presentation has been uploaded on the stock exchange, and we trust you have had the opportunity to review it. During the first quarter of FY '26, global trade developments, particularly the recent U.S. tariff policies have weighed on both market -- on broad market sentiment. While the Indian luxury furniture sector remains structurally strong, these macro headwinds have created a more cautious consumer environment, leading to lower discretionary spending in certain segments. The luxury residential real estate market continues to be providing long-term growth opportunities. In H1 2025, luxury housing recorded significant expansion with sales in the INR 3 crores to INR 10 crores price range rising by 128% and the INR 20 crores to INR 50 crores homes doubling year-on-year. However, delays in property handover, a trend that has been persisted over recent quarters, continues to defer purchase decisions for premium home interior. Despite these headwinds, we started FY '26 on a positive note with a strong growth in both retail and B2B segments. Revenue from operations was INR 1,087 million, an increase of 7.9% over Q1 FY '25. The Retail business contributed INR 640 million, up by 25.2% year-on-year, led by the performance of Stanley Level Next, and Sofas & More, which grew by 20% and 50.7%, respectively. All new stores opened in FY '25 have achieved breakeven, reflecting the effectiveness of our location selection and execution strategy. This quarter also saw the addition of 2 new stores, Sofas & More stores, one each in Surat and Bangalore. As of the 30th June 2025, Stanley Lifestyles operates 68 stores, compromising 43 COCO stores and 25 FOFO stores. The COCO stores accounting for 60% of the revenue in Q1 FY '26. On profitability, gross profit increased by 16.6% year-on-year to INR 624 million, with margins expanding 4 to 8 basis points to 57.4%. Our focus on localization and improving efficiency in manufacturing have allowed us to optimize production costs while broadening the product mix. EBITDA grew 11.9% to INR 225 million with a margin of 2.7%. PAT increased more than 2x to INR 78 million with a margin of 7.2%. We have made a strategic advance in line with our growth vision with Stanley Retail Limited acquiring complete ownership of Shrasta Decor Private Limited. We have strengthened our presence in Hyderabad. This step allows us to streamline opportunities, unify brand representation and improve decision-making efficiency in this key market. Hyderabad is an important growth hub for luxury furniture, and we will invest in growing the Hyderabad market to achieve our long-term growth strategy. Additionally, we are pleased to welcome Mr. J.K. Sharath as our Group CFO. His deep understanding of the company, along with his strong financial and strategic skills experience will be a great addition to our leadership team. He will play a key role in driving our transformation agenda and lead Stanley into its next chapter of growth and long-term value creation. While broader market sentiment remains cautious, our product portfolio is not directly exposed to the categories impacted by the U.S. tariffs. We do not expect any material impact on our business from these changes. Looking ahead, we remain on track to open 15 new stores in FY '26 with emphasis on high potential real estate catchments in major cities and emerging urban clusters. The focus continues to be strengthening the COCO format and offering curated collections that align with the evolving preferences of affluent luxury homemakers. The recent trades being conducted by DRI on luxury furniture importers who were underinvoicing and the gazette for QCO on import furniture having been passed, we remain buoyant about our future growth. With differentiated brand portfolio, integrated manufacturing capabilities and a growth presence in India's luxury furniture market, Stanley Lifestyles Limited is well positioned to capture the opportunities ahead of FY '26. That concludes my remarks. We can now open the floor for questions and answers. Thank you.

[Operator Instructions]. The first question is from the line of [ Arvind Arora from A Square Capital ].

Am I audible?

Yes.

Yes, congratulations on good set of number at retail side. So sir, can you please provide a breakup of retail and non-retail?

So the domestic retail revenues, we have grown 25% compared to Q1 of '25.

Okay, so what is the absolute number?

Absolute number is...

So let me tell you the domestic retail number for us in the current quarter was around INR 64 crores. In the comparing last June quarter FY '25, Q1 was INR 51 crores. So we see an overall close to 25% growth in the Domestic Retail business...

Revenue.

Revenue. In the B2B and the OEM business, our current revenue is -- current quarter revenue is INR 28.3 crores and Q1 of 2025 was INR 22 crores. So we have about 27% growth there. Apart from this, we have our Franchisee and Accessories business. There, the revenues have dropped from INR 27 crores in the last quarter to INR 16 crores in the current quarter.

Okay. Understood. So...

The [indiscernible] growth has come more from the COCO stores.

Understood. So sir, our focus is also on B2C business, correct?

Yes, absolutely.

Okay. So sir, last time you alluded that our target would be to become INR 1,000 crore company in next 3 years, correct?

Correct.

So where we are as of now, like I'm considering the PAT that we targeted like 12% to 15%. But if I compare quarter-on-quarter PAT margin, that's also declined from 9% to approx 7.2%. So what is the reason for this decline?

Which one are you talking about?

Current quarter decline?

Quarter-on-quarter, if you see our PAT percentage has increased from 3.8% to 7.2% from last...

I'm talking quarter 4 to quarter 1, the last quarter that just completed before this quarter and the quarter 4 financial year '25.

So basically, when you look at our business traditionally, we are seasonal in terms of this. Usually, our first quarter and second quarter, you have to normally compare it with the first quarter and second quarter of last year because almost, I can say, more than almost close to 60% happens between Q3 and Q4.

Okay. Okay. And sir, next question is last time you mentioned that we also would be having a discussion with the builders, if there is any requirement. So any update on that part? Any discussion that we are having with anyone so that we can scale up our business?

These are ongoing processes. Our broad vision, what you mentioned remains very much the same, and we are definitely heading towards that. So these are all ongoing processes. Yes, we have just enabled with a particular project in South Bombay. We have got an order for a few mockup kitchens there. These are ongoing processes.

[Operator Instructions]. The next question is from the line of Yug Jhaveri from Molecule Ventures.

So first question is on the COCO retail side. So there is 25% growth. If you can share the number for the last 3 to 4 quarters, like what was the growth in Q4 and Q3, Q2 Y-o-Y basis in the Retail business?

You're asking us to share the numbers of what are the quarters you want us to share the numbers?

Q4, Q3 and Q2. Quarters of last year, what was the growth year-on-year each quarter if you can [ have ]?

You want the growth percentage?

Yes.

Yes, the growth percentage in the Retail business for the last year's quarters.

So if you actually look at year-on-year, it is always better for us because as I mentioned to you, Q1 and Q2 will look a bit suppressed because of season being in Q3 and Q4. So if you look at this quarter, if I look at we have -- compared to last quarter, we have grown at 25%, Q1.

I got that, sir. But if you can provide me last year's numbers, so we can map the growth rate. So if you don't have that right now, what I can ask is that this amount of growth, 25%, have you seen anywhere between the recent quarter last year or in FY '24 or this double-digit 25% growth is after a quite long time?

One minute. We understood, we're just working on the numbers. We'll just tell you.

Sure, sure.

Yes, so if you look at our numbers from the last time Q1 to Q2, we grew by 8% and then we grew by 10% quarter-on-quarter with the previous quarter. And then we have grown by 16% and now we have seen a 25% growth. So this is a progressive growth which we are seeing. And I don't think earlier in the past, at least in the past 2 years, we had any quarter where...

Quarter-on-quarter such a growth.

Quarter-on-quarter such a -- 25% growth.

Sir, this 25% growth is Y-o-Y, right? This quarter compared to last year's Q1?

Yes.

Correct. Correct. Correct.

But sir stated -- the numbers you stated here say 8%, 10% and 15%, it is quarter-on-quarter for FY '24?

Yes, it's quarter-on-quarter.

Quarter-on-quarter growth.

Okay. So year-on-year would be in the similar range or it would be flat?

No, no. Year-on-year, there will be a degrowth because our last March quarter, we had done retail revenue of more than INR 72 crores. Now we have INR 65 crores.

Okay. Got it. So year-on-year, that would be degrowth for last year in COCO business?

That is primarily because you can't compare these quarters because of the seasonality in our business. Generally, our H2 is heavier on the revenue side because of the festival season sales, et cetera. So that...

No, no. I understood that, sir. What I'm trying to ask is that there was 25% growth in Q1 FY '26 compared to Q1 FY '25. Now I just wanted to know the growth rate, what was there in Q1 FY '25 compared to Q1 FY '24. Same goes for Q2 FY '20...

So that number, we don't have right now with us. Maybe we can...

It was not -- definitely not anywhere close to 25%. Normally, I think if you look at year-on-year last 2 years, we have managed roughly single-digit growth only quarter-on-quarter. We will share it with you, not a problem, but we don't have it handy right now.

Sure, I will get that offline. Now the second question was on the same-store sales growth. So what was SSSG are at this quarter? And you said in the PPT it got improved so on that side?

Yes. So generally, we -- this is one of the key metrics which we track for our SSSG. So this SSSG growth has been some -- varying somewhere from higher single digit to double digits depending on the stores and the locality and the region, et cetera.

Okay. And any things which you have done to improve that compared to previous year?

A lot of things. This is an ongoing process. I think like Sunil said, we very frequently look at our store placing, the product placing and also we look at how the stores are performing and a lot of advertisement and marketing focused activities happen to make sure the footfalls come in. A lot of multiple factors play in. And also a lot of things are also depend like if you have high rains and monsoons, there may be challenges in certain cities on the footfalls. So there are multiple factors which happens. Our objective is always to make sure the footfalls are higher and conversions...

Will it be sustainable going ahead, the double-digit or high single-digit growth? Will it be sustainable?

Yes, definitely because also you must understand that a lot of our stores are now coming to maturity, stores which we have opened in FY '23, '24 are now coming to maturity. So we feel that in the due course of next whatever, 6 to 18 months, almost 70% to 80% of our stores will be more mature stores. And the trend is that in a 4-year window, when you look at it, usually the year 1, the business, what the store gives is about 60%. Second year is about 70%, 75%. Third year is about 80% and the fourth year is optimization at about 100%. So now the maturity stores are getting higher because last year, as we told, we slowed down on our expansion plan. We did not rush into the market because we were not getting conducive real estate. But of course, having waited now this year, we have started rolling out our stores better.

Okay. Now one thing I'm not able to understand is the breakup part. So INR 64 crores revenue was from the COCO business, which grew 25% this quarter. INR 28 crores was from B2B business, which has grown 25%. So the INR 16 crores, which you said in B2B2C, so we include that in FOFO revenue or what? So where do we record that revenue?