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

Ladies and gentlemen, good day, and welcome to Stanley Lifestyle Limited Q2 FY '26 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [ Sunny Bhadra ] from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Thank you, Shikha. 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; Ms. Shubha Sunil, Whole-Time Director; and Mr. J.K. Sharath, Group Chief Financial Officer. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Good evening. Good evening, everyone. I'm joined today by our Group CFO, Mr. J.K. Sharath. It gives us great pleasure to welcome you all to Stanley Lifestyle's Q2 H1 FY '26 Earnings Call. To begin, let me take a moment to reflect on our journey. We'll be completing 30 years in 2026, and Stanley began with a simple vision to bring world-class craftsmanship into Indian homes. What started as a modest venture has today evolved into India's only fully integrated luxury furniture brand, blending innovation with fine craftsmanship. Over the years, we have collaborated with some of the world's finest tanneries, perfecting the art of crafting premium upholstery leather for high-spec furniture. Our passion for design, innovation and quality led us from automotive leather to sofas and eventually to complete home solutions, spanning recliners, kitchens, cabinetry, dining, bedroom furniture and furniture for every room of a modern luxury home. Today, we operate from a state-of-the-art manufacturing facility spread across 3 lakh square feet, supported by our skilled 1,000 artisans and professionals who bring our vision of refined living spaces to life. With such exceptional talent and skills and capabilities, Stanley has been able to localize the world's finest craftsmanship to suit the taste and preferences of Indian consumers. It is indeed deeply gratifying to see the precision and uniqueness that we bring to each of our products. We operate through three distinct but complementary business segments: Stanley Level Next, positioned in the luxury segment, offering complete home solutions; Stanley Boutique, our legacy brand, which is now moving towards complete home solutions; and Sofas & More in the value premium segment, which is a furniture retail concept, each catering to different types of luxury and aspirational consumers. Our retail presence spans 73 stores across India, including 9 new additions during the first half of this year. The retail business now contributes almost 70% of our total revenue. We operate through both COCO and FOFO formats, allowing us to expand efficiently across key metros as well as emerging urban centers. During the quarter, I'm happy to share that we inaugurated our first-ever Stanley Boutique Home, a complete upgraded store format from our legacy brand Stanley Boutique, which was offering only living room furniture and now offering complete home solutions. A key milestone this quarter was our entry into the international market through our exclusive distribution and license agreement with Singer of Sri Lanka, a listed entity. We plan to open eight stores in Sri Lanka over the next 3 years, making Stanley's first step towards becoming a global Indian luxury brand. Our new store format, Superlative, which is being built in Hyderabad is expected to be launched in Q4. The work is progressing as planned, and it would house all our premium as well as luxury segment. The store spans almost 1 lakh square feet. In line with our brand philosophy and innovation, we are also diversifying into new lifestyle vertical, offering premium perfumes. This foray reflects our intent to extend brand Stanley beyond furniture, appealing to modern aspiration consumers who value craftsmanship and bespoke luxury. We will also be extending the perfumes to home perfumes as we go forward. The overall Indian furniture market is large and growing fast, estimated to reach $64 billion by 2032. In the luxury and premium furniture segment, especially the market was valued at about $1.15 billion in 2024. For Luxury Furniture India, and it is projected to reach almost $2 billion by 2033. There are several structural tailwinds driving the luxury and premium furniture opportunity. Rising affluence, wealth creation, the number of high-net-worth individuals and affluent households is growing in India, creating demand for premium home furnishing. Urbanization and changing lifestyles, more people living in premium housing, luxury residences, second homes, holiday homes, consumers are investing more in interiors and quality design. Growth in premium real estate and luxury hospitality, luxury hotels, resorts, serviced apartments are increasing, which also drive high-end furniture demand for both commercial and residential segments. Access to global brands, design exposure, Indian consumers are increasingly exposed to premium luxury global interior brands, design consultants, which raises the expectations. Customization, high craftsmanship materials, premium furniture emphasis, high-quality material, bespoke design and craftsmanship differentiates in the market still dominated by mass furniture. Stanley is strongly positioned to play a definitive role in the next phase of India's luxury market growth. Over the years, Stanley has established a strong position of leadership by emerging as an aspirational luxury brand, offering consistent and innovative solution backed by deep design expertise, craftsmanship and strong understanding of Indian consumer preferences. This, we believe, is our greatest strength, one that creates a significant entry barrier for potential competitors. Hence, our commitment remains steadfast to deliver complete home solutions for the luxury and premium segment across India and select international markets. With that, I'll now hand it over to our CFO, Mr. J.K. Sharath, who will take you through our financial performance in detail. Thank you, and over to you, Sharath.

Thank you, Sunil. [Audio Gap] That underscore our operational performance this quarter. With a solid first half behind us, our focus now shifts on next phase of growth, scaling our retail presence, introducing new categories and driving innovation across design, material and customer experience. Every investment we are making today in stores, people and process is aimed at reinforcing our position as India's most admired luxury furniture brand. Starting with Q2 FY '26 performance. Our revenue from operations for Q2 FY '26 stood at INR 1,054 million, marking a steady 2.3% year-on-year growth. This performance was driven by sustained strength in our retail business and the continued trust of our customers. I'm pleased to share that our EBITDA margins expanded significantly by 550 basis points to 23.5% this quarter compared to 18% in the same period last year. This improvement reflects our focus on operational excellence and prudent cost management across our businesses. During the quarter, we signed lease agreement for several new stores as part of our expansion journey. This naturally led to rise in amortization and finance expense as we invest ahead of growth. These are forward-looking investments that strengthen our presence and prepare us for the next phase of growth. Our profit after tax for the quarter was INR 60 million, up 5.3% from INR 57 million in Q2 FY '25. While higher amortization and finance cost for new store additions had a short-term impact, these are strategic investments that will strengthen our retail footprint and drive future growth. Coming to our half year financials. For the first half of FY '26, our revenue from operations stood at INR 2,141 million, reflecting a healthy year-on-year growth of 5.1%. This performance was driven by the continued strength of our retail business with a higher contribution coming from our COCO stores. Our gross profit margin improved by 330 basis points over the same period last year, supported by better procurement efficiencies, greater localization and increased in-sourcing of manufacturing process, all of which helped us deliver a richer and more efficient product mix. The EBITDA margins expanded by 320 basis points to 22.1% in H1 FY '26 compared to 18.9% in H1 FY '25. This improvement reflects the benefit of disciplined cost optimization, and the operating leverage achieved as our retail networks continue to scale. Our profit after tax for the first half of the year stood at INR 138 million, a robust 45.3% increase compared to INR 95 million in H1 FY '25. This performance underscores the strong fundamentals of our business and the growing operating strength of Stanley brand. We feel confident about the trajectory we are on. The fundamentals of our business are solid, and our balance sheet is resilient. We believe we are well positioned to deliver consistent and sustainable growth ahead. We will now open the floor for questions.

[Operator Instructions] The first question is from the line of [ Shubham Biswal ] from Convergence Capital.

Yes, am I audible?

Yes, please go ahead.

Glad to see our efforts -- localization efforts are fructifying and leading to expansion in gross margins. So Sunil, sir, I wanted to understand, so our business, I think, cannot be measured via conventional metrics, right, like sales per square foot because we are not trying to optimize for the store space, right? Or even I think SSSG also won't be that relevant in this business. So what are some of the internal metrics that you keep track of? Is it ASP, for example, because I saw in one of the announcements where you are mentioning how you have taken a price hike recently during the festive season. Or any such metrics that you use internally to gauge your business direction in terms of store maturity or anything else, sir? Yes, that would be my first question.

Thank you very much. You're right. Our business cannot be typically measured with retail mantras of same-store measurement. So as a menu retail brand, we have the flexibility, and we have the pricing power. So what we normally do is, for us, we have a metrics where we have to understand that -- currently, I want you to know that all our stores are profitable. So we have a clear metrics. The first 3 months to 4 months, the store has to start breaking-even. There's an order taking process. And then beyond that, the store starts scaling up. So from our experience, it is understood that the store normally -- the new store normally delivers about 50% to 60% of its true potential by the end of the first year, goes up to about 70%, 75% second year. And only after the third year, it comes to its optimum level. So that's how we measure our store metrics. And that's how we keep an eye on our store breakevens as well as store profitability.

Okay, sir. That was helpful. Sir, also, I would like to understand our business mostly involves grudge purchases, sir. So these are purchases that customers typically make at the end of any house purchase because of which they are reluctant to buy these products and they usually keep it in the last. So in these cases, sir, are we looking for -- to transition our business in some sort of an annuity model? I know it won't be completely possible without diluting our positioning. But are we thinking in terms of -- for example, I was looking at the boutique homes and the boutique home solutions that we were offering. Is it a step to transition into some kind of an annuity where the purchase cycle gets shortened, for example, some sort of service model or to expand the LTV of the customer? So are we thinking in that direction, sir? Like that will be my second question.

So yes, to give you a briefing on this, see, primarily, we were typically a furniture brand, a loose furniture brand, which would normally sell usually sofas and living room furniture. But from 2021 onwards, we have started moving towards creating a luxury format called Stanley Level Next, where we are offering complete home solutions. So the average ticket price of customer spending with us was roughly about INR 2 lakhs around 2020. But now in Stanley Level Next with complete home solutions, it has pivoted to almost about INR 25 lakhs, INR 30 lakhs. That is because of the changing dynamics in the Indian residential construction industry. Today, most of the builders around the country, who are offering premium and luxury homes, sell their products as what is known as -- it's a condition where it's called as warm shell condition. So in the warm shell condition, the customers will only need what is known as fixed furniture and loose furniture. Seeing that opportunity, we moved our luxury offering into complete home solutions. Now we are doing the same thing into our premium offering also. So with the Stanley Boutique Home, we're offering complete home solutions, where normally the customer who seeks the furniture first comes in for a kitchen, then he comes in for a wardrobe, then he comes in for the loose furniture. That's the journey. That is what we are tracking.

Perfect, sir. That was extremely helpful, sir. Just two final questions, sir. Sir, one was the thing about the JVs. I think we mentioned about -- I think it was in the past quarter, we mentioned about the potential for JVs of outside brands coming and collaborating with us. So sir, I want to understand how this JV works usually, if you have observed in like outside and how we can emulate this thing? And so how does this work exactly? How does this JV thing work? Yes, that's what I want to understand.

I want you to understand that as the premium and luxury consumption in India is just about starting, there are a lot of European brands who are looking at collaborating with companies such as Stanley, which has the knowledge, which has 2, 3 decades of understanding that's how we are in touch with a couple of them. Eventually, they will all have to come to India, like how car companies have come and had joint ventures with Kirloskars or with Jindals or whatever it is. So like that, we have the infrastructure ready. We have the market knowledge. We have an excellent manufacturing capability and good understanding of design and build. So by the time if they come as a start-up here, it will take them a couple of decades to establish. So they normally look at -- that has been their global trait. They look at companies that are aligned to the segment, what they're manufacturing and usually give us licensed contracts. So that is what we are looking at going forward.

Perfect, sir. And one final question, sir. I saw we have done a small acquisition, I think, to enter into the perfume segment. Now I understand that this is unrelated segment. So what I want to understand is that are we kind of entering this into this segment full-fledgedly? Like are we trying to make this a product-driven where we are trying to optimize for by entering [ GT, MP ] and making it a full-fledged product thing or just like an accessory kind of a thing where we can just put it in the store itself. So because the thing is that if we are planning it like a pure product approach where we are trying to -- it takes up a lot of bandwidth, management bandwidth. So how are we thinking about this? Is it just an accessory? Or how are we thinking about this, sir? Yes, that's my...

A very, very good question that you're asking me. So I want you to understand as a 30-year-old company, moving from a premium position to a luxury segment, lifestyle extension becomes a part and parcel of the business. You must understand that furniture acquisition happens probably once in 10 years. So we need relevant products for younger customers to touch our brand way in advance, like how we pivoted starting automotive seats in the past, then we moved into sofas and now into complete home solutions. These are lifestyle extensions of brands. They're very much related to premium and luxury business. And it is not going to take much of our time. We also saw that there was a big gap, and India is also now consuming a lot more Eau de parfum, which is not the typical deodorants. India has moved from a deodorant market to a cologne market and from a cologne market to a Eau de parfum. So these are very unique perfumes that we have created with the French collaboration. And then we are launching them in the segment where we are actually competing with the luxury international perfume brand and very uniquely crafted -- leather-crafted bottles. They are currently being piloted only in our stores. The response is very good. And that's what we want to extend our brand into a slightly lifestyle brand. The future, we also want to introduce home perfumes. That's also a large business. So I want you to please understand that the global luxury business, product business is almost $400 billion. So all luxury brands have extended their products into various things. Somebody who started life as a bag manufacturer, makes sunglasses, perfumes, whatever it is. So we have to have touch points. So thereby, we said we have to extend it to fine perfumes.

Okay, sir. Perfect. Yes, sir, because I was just thinking that it takes a lot of -- so is there a dedicated team that we have set up for this perfume, or we are not thinking about it that much. It's very low for now. So is there a dedicated team, sir, like a marketing team that we have set up for this? Or how is it...

At the moment, it is what I call as a simple laboratory stage. We are just piloting. Like we said, we will not really have too much of bandwidth. It is part and parcel something that is a small little laboratory we have created in our facility. So it doesn't take much of a bandwidth. We have an expert perfumer who has worked in France, who has curated 24 different notes, and we just started the sampling, and the response has been fantastic.

Next question is from [ Khwaish Jain ] from [indiscernible] Investments.

Am I audible?

Yes.

So my first question was that you have guided in an earlier earnings call that you were targeting INR 1,000 crores revenue over the next 2, 3 years. So despite flat growth in previous years and considering the luxury furniture market in India is growing only about 5% to 6% CAGR. How are you planning to achieve growth meaningfully ahead of the industry? And what specific strategies will drive this target?

Yes, very good question. Thank you. And you must understand that after listing just about a year ago, we have gone through certain major plumbing changes in the system. There's been a lot of technology implementation. We could not haphazardly grow because the old platform would not sustain this kind of growth. So we had to go through certain changes, introduction of Salesforce in the front end, introduction of SAP HANA in the back end. So a lot of technology has been already implemented. Yes. So yes -- so basically, with these corrections, you already see that our EBITDA levels are starting to increase considerably, and we are being very, very meaningfully trying to get the right locations. So this will be a slow ramp-up. But definitely, our target of INR 1,000 crores holds very good. That is an unchanged target. We will definitely reach there.

Okay. My next question was that you have mentioned that company is focusing on increasing raw material localization with the target of 80% localization in 24 to 36 months. So is this time line still achievable? And what would be the impact on material cost and margins in numbers once fully implemented? Also, if you could specify which key materials are being localized like wood, leather or hardware components.

Yes. So primarily, we are going to focus on our #1 raw material, the expensive raw material, which is leather. As of now, we have been fairly successful, and that also shows in our gross profit improvement in the H1 of this year. We continue to source, but we have to be extremely careful not to kind of compromise on the quality. So that is a long-drawn process. A lot of Indian tanneries do not have the capabilities. So we are getting in Italian expertise and going about in an organic manner, but we remain very confident that it will be localized to almost 70%, 80% due course of the next 1 year.

Okay. So could you please throw some light on what would be the impact on material cost and margin after localization is complete?

Yes. I think we should be looking at a saving of roughly between 20% to 25% once we localize completely. As of now, we are having a benefit of about close to 15% on the BOM because leather is a significant purchase item, and it's almost 50% of our BOM.

Okay. And one last question that you have mentioned that you -- that the model has been shifted to cash and carry. So -- but the receivables haven't shown a meaningful decline. So could you clarify what explains this trend?

Yes. So our model is for the branded business of furniture, it's always been cash and carry. There was one particular trading item where we were giving credit, that now we have changed to cash and carry, and we are seeing a meaningful increase in that going steadily, but we are still maintaining the cash-and-carry policy as of now.

Next question is from [ Darshil ] from Crown Capital.

Hopefully I'm audible.

Yes, you are.

So sir, I just wanted to understand like in terms of growth this year, where do we see ourselves and like what is the guidance that you would like to give for growth for the current year?

So basically, as I mentioned in my previous answer that we have done certain plumbing changes. And for that, we are seeing -- witnessing a robust growth in our gross profit, our EBITDA, including our PAT. So these corrections have been done. Yes, there have been certain global headwinds and there have been delays in project handovers, but we remain confident that we will meaningfully grow going forward.

Fair enough, sir. My question was towards our top line because if we can see from the last 3 years, we are somewhat in a range of like INR 400 crores. So just wanted to -- and even in the first half, we are in the similar run rate. So just wanted to get your opinion that while we've done fantastic on our bottom line and cost control, but how will our top line also increase? Like what are the levers that we can push forward for top line increase? And we have like a double-digit, 15%, 20% growth coming forward years...

So if you look at the last 3 years carefully, you will understand that we have shifted our model more towards the COCO business in the major metros. That is the most important changeover. And also, our COCO business has significantly grown even this H1 by almost 23%. So that is where the real change is coming. So that is exactly what we want to do. We want to focus on menu retail COCO brand business, and that is how we are kind of looking at growing our business going forward. And with the kind of monies that we have raised and meaningful investment into new stores, mostly COCO stores, we believe that we will significantly grow and our target of INR 1,000 crores in 3 years remains very intact.

Okay. That remains intact, right? Fair enough, sir. And sir, just wanted to know like in terms of perfume industry, while you've explained what all we are doing, but will it have a lot of branding cost because like the existing players like we'll be competing with the high-level brands and everything. So we'll have to build our own brand. So how do we look at that? So what kind of investment will we have to do? Will we be burning some money out there or -- and like I think in perfume has really good margins, but what is the investment like we are looking for? So will it breakeven in the first year of sales or just some more -- a road map for how we expect the perfume business to perform?

Yes. At this moment, as I mentioned, we have taken this as a small extension in our brand. We are only selling it, piloting it in our Stanley Level Next stores, and the results have been very good. The margins are extremely high. But also, we will not be investing in marketing or anything of such in the first 1 or 2 years. We will normally be using these kind of products to do a lot of gifting to our high-end customers, gifting to architects and interior designers as a touch point. So there is no major, what we call as investment -- significant investment that's going to go. It is just a piloting that we have done, and I don't see any kind of a bandwidth dilution. In fact, there's a -- I would say there's a fabulous brand extension that happens with products like this.

Okay. Okay. Fair enough, sir. And just last question from my side. So over the next 1, 2 years, because we're opening a lot of stores, so what kind of like CapEx are we investing like in terms -- like this year and next year, if we could bifurcate year-wise CapEx that we are planning to do, sir.

Yes. I think we will remain very much in line with the prospectus. We don't see any major requirement coming in terms of CapEx. We have managed our funding very well, and we are going to go very meaningfully. Again, we are not going to come under pressure just to kind of open stores. We have to get the right locations, the right real estate. We are very fussy about these kind of things because when you're positioning and creating a luxury brand, these are very important aspect. So I think we will stick to what we have in the prospectus.

So if I remember correctly, it was around INR 140 crores, right, like what we had aimed for, that's the plan, right, sir?

Yes, yes, yes. That is -- we are very much in line with that.

Next question is from Madhur Rathi from Counter Cyclical Investments.

Sir, so the Stanley brand is owned by the company or the promoters?

The company.

Right, sir. And sir, in the consolidated balance sheet, I can see that intangible assets have increased from INR 5.3 crores in March '25 to INR 42 crores in September '25?

Yes. So this is basically the brand which was acquired from the promoters. They were sitting under a capital work-in-progress. Because the transfer of the IP has now happened in the company's name through the normal route process, it is capitalized, and it has gone as intangible asset.

So basically, how much have we paid to acquire that perfume brand from the promoters?

It was done before, not in the current period. Before the IPO, they had paid INR 37.5 crores and acquired all the Stanley brands, and this was pending to be approved by the agency of transfer from -- to the company name. This happened during the current H1, and they have capitalized that as part of intangible assets.

Right, sir. Now going forward, I wanted to understand that what is our price positioning, let's say, vis-a-vis an IKEA. So are we pricing our products at par, at premium or discount to them?

No, no, no. IKEA is way lower. We don't play in that segment at all. In fact, we start much higher. They play in what is known as a value and mass segment. We start with the value premium, then we have premium, and we have luxury.

Right. And what -- how much is the average CapEx that it takes us to set up a new greenfield store?

So it depends on the three different formats. The luxury format can take anywhere between INR 7 crores to INR 10 crores. The premium format will take between INR 3 crores to INR 5 crores and the value premium can take anywhere between INR 1.5 crores to INR 2 crores.

And once we open the store, how many months or years does it take for a new greenfield store to typically breakeven?

So we follow a breakeven within the first 6 months and then the complete ROI within the 24 to 30 months maximum.

Right. So as of now, are all our 19 stores profitable?

As of now, all our stores are profitable.

Okay. That's great. Sir, going forward, sir, now this INR 1,000 crores that you alluded to, sir, by when do you realistically foresee us reaching that number?

We have been very clear that we will take 1,000 working days. So you can say almost between 3.5 to 4 years from the date of IPO. So when you look at 1,000 working days, so that is the target we have, and I think we will definitely reach that in the next -- whatever, within the next 3 years.

Okay. Great. And sir, what kind of CapEx are we looking at to reach there?

We have adequate funds. We will not need any funds because now the age and maturity of the stores have started. So like I have been telling you that when we start a new store, it gives only about 50% to 60% of its true potential in the first year, goes up to about 60%, 70% in the second year. So in the third year, it reaches about 80% to 90%. And normally around the fourth year is when it is fully matured. So when you look at our new stores, we are starting the aging process. So I think we will not require any more funds to get to our target.

Next question is from [ Sumit, ] an investor.

Am I audible?

Yes, go ahead.

I just wanted to know -- I have a few doubts. First regarding the INR 1,000 crore revenue target which you have given for -- from the IPO time, from 3.5 to 4 years. So you have a time line like this is more of [ gap ] to reach that target. But in past 3 years, you haven't been growing, like there is not even a double-digit growth in your revenue number. So how are you thinking of reaching that INR 400 crores to INR 450 crores revenue to INR 1,000 crores in coming 2 to 2.5 years?

So again, I'm repeating myself so that I have a lot of clarity. I repeated this a little while ago. You must see what is happening in terms of how we are growing. For last 3 years, we have been very steadfast in acquiring our FOFO partners, and we have today COCO stores in the top six metros of India. So our store count was barely 20, 25 3 years ago. Today, we have expanded to almost 72 stores. So this is what it is. So essentially, also there has been a shift in our business. Our COCO has grown, even H1 this year, we have grown by almost 23%. So that is the shift that is happening. And once you realize that the shift is more towards menu retail COCO business and the format, what we have changed from loose furniture to complete home solution, it is a very clear trajectory that we are chasing, and we will reach the number. I hope I'm able to convince you with...

Yes, yes, yes. I'm okay with this answer. Second, marketing spend. Sir, like I've been tracking the company and I've been reading a lot of newspapers on a daily basis. Sir, I see your ad like for -- the sale ad, like it's coming for the past 2 to 3 months, like in Business Standard somewhere, sometime in some other newspaper. So when is this sale period going on? And how much do you spend on this marketing?

So very interestingly, our marketing spend throughout our journey for the last 10, 15 years, being a profitable company, has always remained in a single digit. We have never exceeded a single digit. So our customer acquisition cost has been very well controlled. As you rightly said, normally in the season period between September and December, we always go on what I call as a sale, but those sales are technically for floor stocks that are there, and they are always refurbished with new products. That's how we generate footfall into our stores.

This sale is not only for the boutique one and the Sofas & More, which you are telling...