Please note that this conference is being recorded. I now hand the conference over to Mr. C.K. Venkataraman, Managing Director, Titan Company Limited. Thank you, and over to you, Mr. Venkataraman.
Thank you very much. Hello, and welcome to everyone on the call. Quarter three was a very good quarter in terms of sales growth for the company, standalone as well as consolidated, including CaratLane and TEAL subsidiaries. This growth was driven substantially by the jewelry business and the watches business, while EyeCare, ethnic wear, and the perfumes categories were under pressure in terms of sales growth. But our overall understanding of all the categories and various strategies that are already in place, you know, gives us a lot of confidence for quarter four and FY 25. And the overall confidence level in the company is very high, and we continue to be bullish on the prospects for all the businesses. And the rest of the information is on the presentation, which you have access to.
Now, we can move directly into the questions, please.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Devanshu Bansal from EMKAY Global. Please go ahead.
Yes, sir. Hi, thanks for the opportunity. Sir, retail, UCP growth, as well as like-to-like growth, has seen a meaningful deceleration, compared to previous two quarters. So what are the reasons attributable for this? Do you expect growth to bounce back in the coming quarters? This is for Tanishq.
Yeah. Hi, this is Ajoy here. I had mentioned in a previous quarterly call that there was a certain timing effect of Shradh between quarter two and quarter three. Last year, it was in quarter two in September. This year it was in quarter three in October. So consequently, there, that time, we were not able to estimate exactly what is likely to be this interplay. So yes, to that extent, there is an impact. And the second piece is, so we had a very good festive season growth. In fact, very happy with that. But then thereafter, in December, there seems to be having a blip, perhaps, driven by a sudden spurt in gold prices, which happened. Between November to December, gold prices went up by INR 200 a gram, and over previous December, it was INR 800 a gram.
So sometimes when that happens, there is some hesitancy from customers to come into the market. And, you know, therefore, what we looked at is, we looked at data from September to November and compared, and there the growth continued to be very healthy because that covers Shradh in both the years. And then December was a particular month, and then again, you know, January has been good. So in many ways, I would consider December as the blip and the Shradh period, which is resulting in the sales figures looking lower than the previous quarters. My confidence is that in quarter four we will bounce back. How much more it will bounce back, I can't say, but one is hoping and expecting it to be better than quarter three.
Got it, sir. Second question is on the margin front. The jewelry EBIT margin has declined about 80 basis points this quarter. In my opinion, a 2% mix change towards studded should have resulted into only half of this decline. Plus, there should have been some operating leverage as well. So what are the other growth investments that we are doing which is leading to this kind of a margin decline?
So I don't... I'm not very sure about the math behind what you said, but, the reasons for margin decline are as follows: One is, as you pointed out, studded ratio or studded mix being lower. That is certainly one of the reasons. The second thing is that there have been, I think, I mean, the competitive intensity goes up whenever gold prices rise significantly. So even in quarter three, we have seen gold prices go up 16% year-on-year. And, that's the season where everybody is waiting to sell. So naturally, market competitive intensity goes up, and therefore, we've also responded tactically with offers, with exchange, with, with a program to protect gold rate for customers like we've done earlier on as well.
Because for us, ensuring that during the most important season, we don't lose share is a priority. So some amount of payout is there. And of course, marketing, we have also invested during this quarter because there is growing competitive intensity, so we felt it's the right time to put in. So we continued our advertising and, you know, for weddings, we continued besides the festive season. And we also did some work on digital, on studded, et cetera. So marketing costs also went up over last year to some extent. So these are all the top three investments that I can think of. I don't know if the math adds up in your mind, but this is, these are the three things.
... Yeah, so I was taking 20%. Yeah, sure.
Just to add, you know, if you look at quarter-on-quarter, there could be several things, but nine months, if you look at, it is reasonably okay and the way we have been talking about. So, yeah, just to add that. Yeah.
Thank you, Mr. Ashok. I have more questions. I'll get back in the queue.
Thank you very much. The next question is from Latika Chopra from J.P. Morgan. Please go ahead.
Yeah, hi. Thank you for the opportunity. My first question was, you know, if you could share your store opening plans for key jewelry formats, Tanishq, CaratLane, and Mia. And I noticed, you know, in this fiscal year, YTD, you've opened 43 Tanishq stores and 15 Mia stores, but only 40 CaratLane stores. And the like-to-like, you know, retail sales growth for CaratLane has also been lagging Tanishq. So is this a price or a mix issue, or is there some bit of a demand issue that you could elaborate on? Thank you.
So, I'll just clarify, Latika. We have in domestic opened 36 Tanishq stores. The remaining, I think, will be to do with international. And in Mia, we... Yes, 50, CaratLane, 40. Those figures are right. In Tanishq, we saw the opportunity to up the play. And even though we had not planned so many, we went ahead and expanded because we found the right opportunity, right property, and we were able to get those going before Dhanteras. And we have now, in a way, you know, expanded the list of towns and markets and said whenever the opportunity presents itself, we will go ahead and open, because execution can follow thereafter. In the case of CaratLane, while 40 have been opened, there were, I think, 90 opened last year. So many of those 90 had to stabilize as well.
There are many more which will come into play as we go forward. This is not indicative of any long-term strategy. This is something to do within this, this year. That's all.
Plus, one thing to keep in mind, Latika, is, you know, this is not the equivalent of an expensive car versus a more affordable car, which can go to smaller towns faster than an expensive car. Tanishq actually is a more traditional jewelry brand, which is available in Rewa, in Sagar, in places like that, where general people buy jewelry, whereas a CaratLane will take a longer time to reach a Rewa or a, you know, Sagar. So that advantage that Tanishq has, so that also has a, you know, bearing in this, plus what Ajoy said about 90 + 40.
So, if I may, carry on. Mia and CaratLane actually will continue to see more opportunities also. It's just a timing piece. I mean, last year, 90, and therefore, this year, whether, you know, 40 will become 50, 70, 80, 90, that depends on the opportunities. And therefore, you, you must see it over a 2-year timeframe rather than a single year.
Sure, that helps. The second bit I wanted to ask was, you know, your other two segments. You know, on watches, how, you know, you talked about higher marketing spends impacting margins, but on a full year basis or over medium term, how should we think about the margin profile, given, you know, the salience of wearables will keep rising? And on eyewear separately, you know, numbers on like-to-like growth rates have been muted, and it seems store addition has slowed down, you know, this fiscal year. So are there any aspects you intend to revisit here to drive better growth momentum in this segment? Thank you.
So for watches, yes, in the festive season, we spent a lot of money marketing our brands and all our festive collections. So that is kind of way higher than what we had spent last year. And it did help us in getting a very good sales top-line growth. The overall margin, which we had earlier indicated, maybe 13, right now 11-12, at least for the next couple of quarters, because of you know, the overall mix, as you mentioned, wearables where the ASP is slightly lower, becoming a big propeller of growth. And so therefore, it is at this point, this is, it will kind of see this kind of margin for the next two, maybe couple of quarters.
Hi, Latika, this is Saumen from EyeCare. Beginning of the year itself, I think we have said that our expansion will be calibrated, so it is not rapid expansion. That said, in the year, I think we almost opened 60+ stores, but you also have to rationalize a few stores which are not sort of delivering the expected kind of numbers. Net count has not significantly changed, but expansion, rationalization both happened simultaneously. As far as the growth is concerned, from mid-September to November, across the industry, there has been, one would say, a very strong headwind that everybody experienced. We are not an exception. There is no exception really in the whole this thing. So it was very difficult to sort of, you know, get the numbers going.
December was better, and that's what we expect the coming months to be. So, what we saw here is kind of a reflection of a industry-level phenomena, rather than just a specific to our division.
All right. Thank you everyone, for the detailed answers. Appreciate it.
...Thank you. The next question is from Avi Mehta, from Macquarie. Please go ahead.
Hi, sir. Thanks a lot for this. Sir, I just want to check if you could update on how the demand in the jewelry for the sub 50K seg segment is behaving, because you had pointed towards that being under stress. Has that changed or is it still deteriorating further? Any updates on that, please?
Yeah. So the sub, I would broaden it to sub 100K, because it's difficult, because the gold price is going up, and overall, some, some shifts take place between slabs. So sub 100K, at an overall level, if I look at it from a portfolio play of Tanishq, CaratLane, Mia, I think there is a stability in buyer growth that I'm seeing. And I'm now looking at, you know, the, the period that I mentioned in the earlier part of this call, September to November, then I looked at December, then I looked at January also, and I'm seeing a very stable set of buyer growths. So across the portfolio it's there.
But having said that, if I think of same store growth for even CaratLane and Tanishq or some of the Mia stores, and in Tanishq, in the sub-100K, there seems to be some amount of sluggishness in the new customer segment out there. And that is, there's a softness, let's put it that way. Now, is it because... partly it's because we think the, that consumer is facing some economic challenges, because of, you know, they could be modern consumer, they are IT, digital, and there, there have been some economic challenges for that consumer segment. And the second piece is, there could be some share of wallet, let's say, you know, shifts or not structural, I would say, fluctuations that are taking place.
Because we see certain categories, COVID grew well, some others were still depressed, now some categories have started picking up, whether it is travel, hospitality, experiences, you know, vacations, SUVs, but garments is down. So there is something going on in the share of wallet in the context of some economic truths for this segment, and therefore, the sub-100K and also included in that in the sub-50K does have some degree of softness relative to what we think it should be. Having said that, when I look at it as a portfolio play across all the brands that we have in our portfolio, I am seeing a fairly good stability on buyer growth at a total level.
Same stores growth, yes, but then we've also added lots of stores in CaratLane, Mia, across the board, so not able to get a sense on that. But yes, there is some... We wish it could be better, and it has remained stable and similar. It hasn't really deteriorated, nor has it significantly improved or changed.
Got it, sir. Got it. And so the second bit is on this competitive intensity that you alluded or highlighted, given the increase in gold price. Does this in any way make us revisit our margin expectation for the year, or are we- is this in a fairly comfortable level? Because you've been citing this, however, the margin delivery has not taken ahead. But I just wanted to get a sense if that has changed, especially because some of the other peers are doing a lot aggressive on store additions. So would love to hear your comments on that part.
So our EBIT margins continue to be in the range that was indicated between 12%-13%, despite this weak studded quarter, and weaker than what, let's say, we had last year. So at 12.2, it is fairly good, I would say. It's not such a... And as Ashok pointed out when he alluded to it, when you look at it at a YTD level, because of the shifts between things here and there, it is also pretty good. You know, it is exactly bang on in that range of 12.4%. So to me, and to Ashok and all of us, we've been saying 12%-13% is a very good range to expect our margins to be, competitive pressures notwithstanding.
They will come and go, there will be season time, everybody will want to do something, but we will respond. And, you know, there are ways to manage the margin, both gross margin as well as net margin. So we are still confident of the 12%-13% range.
Sir, on the competitive intensity, has that changed? Because some peer has been accelerating on store additions. I, when I say this, competitive intensity does not necessarily be in pricing. It also is in terms of being able to add franchisees or otherwise.
No, that is not such a big worry for us, because actually we track 45-50 competitors. We don't track 1 or 2 national chains. And for us, in every market, the local players are as much an important competitor, as much as the national chains. And sometimes local chains are there, as well as independent standalone jewelers will also be there. So we track it at city level, and frankly, you know, 1 or 2 players adding 10, 15, 20 more stores or 30 more stores, doesn't move the needle, because already there are existing players there, and in many of these cities, we are the challenger. So we actually think it's good if more players get into organized play, because that strengthens. In fact, that brings out the strength of our brand even sharper in those markets.
Market share is not a concern, right, sir? That's all I wanted to know. That's, your salience of market share continues to grow up. That's, that's what I wanted to know.
... I think we have gained in many markets, and we have remained stable in most others.
Perfect. That's all from my side. Thank you very much. Thanks a lot, sir.
Thank you.
Thank you. The next question is from Vidisha Sheth , from Ambit Capital. Please go ahead.
Yeah, thank you for the opportunity. I just had one question on the studded mix. What is the reason for softness seen in the studded jewelry at standalone level? While you've mentioned that there was a blip in December for the overall jewelry space due to sharp increase in gold prices, but the reason to ask this is that the trend is in contrast to the growth that category has seen. So is it that the accessible or entry-level part of the portfolio is relatively unaffected?
No, I think, I'll respond it in two ways. One is, in the month of December, there was a definite drop in the studded sales demand, and as I said, that is one month out of... If I look at a four, five-month period, including whatever we have seen in January. So we see it as a temporary blip. And also, when we spoke to a lot of vendors who supply studded jewelry, they also confirmed that December was a very soft month for most players in the category. So that is the second source that I wanted to share. Third is, if you're asking what has been specifically different, the softness in the sub-100K was one commentary we made anyway.
But in this particular quarter, high-value studded, which is, you know, INR 5 lakhs and above, et cetera, also saw a certain softness. Now, whether it is because of share of wallet, because of people deferring their expenses here and there, it's very difficult to make out. But this kind of came through in the month of December, particularly strongly, and therefore influenced quarter three. As I said, if I look at a five-month period, it seems to be temporary and not structural.
Very clear. Thank you.
Thank you. The next question is from Siddharth Dan, from Goodwill. Please go ahead.
Yeah, hi. My first question was on eyewear. Like, over the last 5-6 years, you know, we've been told stories about how we can turn around, make changes in the eyewear division, but clearly, you know, we are lagging. Can we get a better 3-5-year picture? And are we not fooling ourselves, you know, we're not even able to make INR 100 crore EBIT over there.
Hi. I don't fully understand what you're actually asking. From where we were three or four years back, where we are, we ended last year versus where we are, I think it is significantly different than the picture that you're referring to.
Okay.
And, we had a good quarter one, good quarter two. We were pretty much close to the budget that we have had in the beginning of the year. We had 12% and 16% sales growth. As I just explained, between September and November, we saw a kind of resistance in the eyewear segment across the industry. There are no player that I heard, whoever I spoke to, that they had a good run. December was a bit of a relief. So it is a, it's a cumulative effect of a period in which the category did not see too much of attraction. That's what we see, that's what we conclude, and we have our plans for future.
Over a 3-5-year period now in eyewear, how do you see the industry going?
I am not going to make a projection for another three to five years. Now, right now, we are looking at the next quarter, and as we plan for our FY 25, we'll probably share with you our plans.
Okay. Okay, okay, and my next question then would be around TEAL. You know, we are doing some good business around semiconductors and all over there, but you know, there's not much out in, you know, for shareholders to know. So what, what's the business that we are doing? What's the market scope over there and our customer profile or something like that?
Siddharth, you're talking about TEAL?
Yeah, TEAL. You know, there are some media articles about our new facility around Hosur and all, but...
Yeah. Our two main businesses in that subsidiary are manufacturing services, where we make very high precision components for the aircraft and defense industry. Our customers are people like Collins, Pratt & Whitney, engines and all that. And the other division is automation solutions, where we put together bespoke automation solutions which use robots, vision cameras and welding, you know, and stuff like that, to automate assembly lines across industries, automotive being a big segment which we focus. So these businesses are roughly 50/50 in terms of share of turnover. Both are international in their scope. And the overall opportunity for this company is very, very strong.
But because what happened during COVID, particularly, in the international auto- I mean, aircraft manufacturer sector, we had a significant challenge in FY 21, but all that is generally behind us now. And, you know, as we speak, we are on the recovery path, and FY 25 should be very good.
No, so the semiconductor division itself, so it'll be within, automation?
Manufacturing service.
Manufacturing.
Manufacturing, okay. No, so within that division, what is the potential to be shared?
Semiconductor division.
Yeah. It's not really a separate division, but manufacturing-
Manufacturing.
Yeah. So-
No, this is for the semiconductor machinery industry.
Correct.
We make sub-assemblies for the semiconductor machinery industry. The manufacturing services division does that.
Okay, so within that, it's a small division.
It's a segment. It's a segment within the manufacturing services.
Within the manufacturing. Okay, thanks.
Thank you. Before we take the next question, we'd like to request participants to please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead.
Yes, thank you so much, and good evening to everyone. So my first question was just a clarification that on the jewelry margin bit, was there any impact of diamond prices which we were discussing earlier? Just to be sure about that.
In the current quarter?
Yes, in the current quarter.
In the current year, no, there is no significant impact of the diamond margin. There might have been something last year, but it was not material enough last year, so I don't know. But in this, this quarter, there is nothing that, that is extraordinary. Yeah.
Yeah. More referring from a negative impact rather than a positive one.
Small corrections, I think we spoke about on solitaire side.
But it's not very material. No, nothing material, I would say. We took some minor price correction on solitaire, but it's a very small quantum, which we felt was appropriate, we took. But no, nothing material, because at an overall level that has not really impacted too much anything. Nothing to call out, really.
Sure, just to clarify. The second question was, again, you know, comparing CaratLane and Titan. Is the first time, maybe for a span of a few months or quarters, we are seeing the SSG profile being slightly different between a Tanishq and a CaratLane. So just to understand, is it more, in your opinion, a perspective of maybe the different customer segments and how they've been impacted, or a lack of activations, or any other aspect that you may want to read into looking at, say, the last nine months?
No, I think, two things. As I said, in Tanishq, you cannot take the entire Tanishq performance, whether same store or growth, and compare it to CaratLane, because the price points and segments are very different. Then there is a very large gold component also sitting in Tanishq. So actually, the studded and within Tanishq, the studded less than INR 100,000 and, you know, less than 50... CaratLane is mostly below INR 50,000, the bulk of their. So I think, they are not directly comparable from the figures you have. The second piece is, CaratLane has had a spurt of- they've added lots of stores last year, so, and many of them in similar, in the same towns as well. So there is likely to be some pluses and minuses happening there.
In the case of Tanishq, the same-store growth, upside has been or better performance has been also driven by the gold part of the business in this quarter. So I'm not reading too much into this. I don't think... And of course, the segments are different. I'm picking up a thought which Venkat had shared in the last earnings call, that when it comes to gold business, you know, it's a question of gaining share because the market is already penetrated. Customers are already buying gold jewelry. But when it comes to studded and that too, in the sub-50K, it is a case of market expansion. That segment is getting created as we go along, and therefore, there's not much share to gain as much as getting more customers into this pie.
That process doesn't happen overnight, so therefore, the behavior of that segment versus the behavior of the overall jewelry segment will be different. In that sense, yes, the customer segments are different and the opportunity spaces are different.
Got that. Could I just take one final question, is that fine? I'll just go ahead. But, for the watches and wearables business, I think, when we had the analyst meet two years back, we were looking at a target of 18% margin. Just wanted to check, are we on track in looking forward to that?
Well, that was like a very, you know, big dream ambition that we talked about, 10,000, and later we had revised it down to 16%. 10,000 would still be doubling the sales turnover in UCP terms from INR 5,000 crore to INR 10,000 crore in a matter of three years. So obviously, all of this requires a lot of investment, and then we later kind of made it more realistic. So we are still pushing for, maybe a 15, 16% in the next... after two years. Yeah.
Thank you so much.
Thank you. The next question is from Percy Panthaki from IIFL. Please go ahead.
Hi. I just start with one clarification. You have mentioned in your PPT that the India jewelry growth is 21%. Would I be right in assuming that that's a primary growth number?
Yes, yes. Our growth in, for the division, excluding CaratLane, just, Tanishq, Mia, Zoya, 17% in secondary retail, Tanishq is 16%, and the primary growth would be around the 21%-22% mark. That's what we are seeing. And that's to do with the timing shift. In fact, we had a better secondary growth than the previous quarter, if you recollect, and the primary growth was lower, lower at 20%. So some shifts due to the season shifting.
Okay, okay. So basically, the secondary sales growth is 17%.
17% for the division, 16% for Tanishq, and CaratLane is separate, 32.
Understood.
And therefore, YTD, they give you a better feel... Look at YTD.
Sure. When you say 21%, does that include the CaratLane in it?
No, no, no. That is separately reported.
It does.
Since it's a subsidiary.
Secondly, I just wanted to ask, and it's not a question pertaining to the quarter, but more of trends that you've seen in last few quarters. Do you think that at a industry level, there is an accelerated shift from unorganized to organized, which is happening anyway? See, there was anyways a shift happening since many years, but has this shift really materially accelerated? And if so, what are the drivers of that acceleration? Because we are seeing not only you, but many of the other players, at least in the listed space, two or three other stocks are also reporting fairly high growth numbers. So just from that point of view, I'm wondering if there is anything to read.
See, even the World Gold Council data, which I see for demand, of course, they don't include exchange jewelry, and all that, but for whatever it is worth, in Q2, that is a September quarter, they've actually, I think, shown a slight decline on a YOY basis in the jewelry demand. Whereas, I think, all the organized players have done very well. So that is the context of the question. So is there any such accelerated shift, first of all? And if so, what are the drivers? Is hallmarking a really big driver? And if so, I mean, just your thoughts on that.
No, I also think, I don't have the hard data right now, but overall, if I see the growth and market share that we keep tracking for local players, and then chains and our own brand, we have been seeing that as more and more chains are opening across different parts of the country, the growth rates are different, and therefore, yes, there is, there is some kind of acceleration. And I think with, people getting listed and having access to capital, there is greater expansion that is going on, and some of the other players are wanting to expand, put up stores, and then probably go for IPO also. So there are both sets of players. The other piece that I am... Therefore, yes, to, to what you are sensing, I also tend to resonate with that.
Not with saying the gold World Gold Council figures, because their figures are on kgs and grammage and all that, so-
Sure.
It's too macro to conclude. The second piece is, there's another phenomenon that exists, that many local players are also becoming organized in the way they operate. They may be a one-off store or two or three stores, but they are changing the way they operate in response to the reality that they are facing, and therefore, they are becoming sharper in terms of the customer service, the store ambience, the marketing that they're doing locally, or even the kind of services they are offering, and transparency with which they are also doing exchange and other things. So I think they have also understood that the name of the game is to become more organized and more transparent, and therefore, gain trust. So I think that's the other phenomenon that one is seeing.
Therefore, I think this is secular and will continue to accelerate.
Understood. Also just wanted to get some idea on a 3-year horizon or a 5-year horizon, what is the total number of Tanishq stores that you would be looking at, let's say, for FY 28 or something like that?
To be honest, I don't have a number in mind. We are approaching this from a 1-2 year horizon because opportunities are emerging all the time. To just give you a broad feel, we are present in 264 or 265 towns, approximately. We think in in existing towns, as new catchments are emerging, as well as newer towns, there is no reason why, you know, we, in the next couple of years, why we can't reach out to 300 towns. But beyond that, can I have an answer? No. How many stores? No idea. So allow us some time, maybe whenever we have the investor day or when we are able to share with you a slightly longer horizon, we will do that. Right now, I don't have a number.
Okay, okay. So that's all from me. Thanks, and all the best.
Thank you. The next question is from Aditya Soman, from CLSA. Please go ahead.
Hi, good evening. So one question on the international business. Can you give me, give us a sense of, I mean, you've given a number of 100% retail growth there, but can you just give us a more qualitative information on the average ticket size and, especially in the US?
Sorry, what is the first part of your question? I missed the first bit.
Yeah, no-
Second bit on average ticket sizes, I got.
Yeah, yeah. No, just in terms of qualitative information on ticket size and the customers that you're... I mean, a typical number of customers that you're looking for at a store level. And any sense on that would be super useful since we don't have context on those stores.
Sure. This is Danny here from the IBD team. In ticket sizes across the board in almost all of our international locations are significantly higher than India. They are ballpark in the INR 2 lakh per customer kind of a space. And, depending on the locations, particularly in the US, they're even higher than they are in GCC. And even generally, the studded ratios are overall higher compared to what we find in India, which works for us, because obviously, the costs of operating in these markets are significantly higher, both, let's say, rental as well as people costs are significantly higher. And this allows or gives the business the ability to manage those costs much better.
... And we see that, sorry, yeah, go on.
No, sorry, go on.
We see that, you know, holding out, in fact, as we go into it over a period of time, we've seen that there is a certain stability that is happening there. In certain cases, as we have a set of returning customers, we are even seeing some increases on that.
Understand. And, and can you just explain the economics? I mean, all these, are these, which, how many of these would be owned stores or franchise stores or, or... And, and in terms of economics, are they similar, from a margin perspective to what we are seeing in India or, or likely to be similar, less than I'm sure?
Typically, wherever we go in first, we set up our own stores, company-owned, company-operated, L1 stores, because it helps us understand the lay of the land and what we need to do in those markets. But we also, as we go along, bring in partners, either partners from India, existing partners, and many of them are eager. We have quite a few of our Indian partners reaching out to us, saying that either they have a relative or they have some capability in an international city, and they would like to set up a store. So, for example, in Dubai, the first four L2 partners are from the four regions of the country, from the north, from the east, south, and the west. We have one each, interestingly, from each of these regions in Dubai.
So that, I mean, overall, we still continue to hold that. We follow the same asset-light model that we are doing in India, where we will, over a period of time, look at having more L2 and L3 stores. But to get a sense of the business and to start operating, it always helps us when we do it as a L1 first. We're now starting to have L3 stores as well. For example, in Singapore, the store that we opened is with an L3 partner.
That's very clear. Thank you. And one last question on the Indian ethnic wear business there. You mentioned that growth has been a little slower. Any reason and any sort of information on why growth has been slower? And is this, like, across all the three months in the quarter, or was it again specific to, like, December?
Yeah. Hi, this is Ambuj here. When Venkat referred to the ethnic wear division, the growth being low, he was referring more to the like-to-like. But whereas if you see our overall growth has been, I think 61%, in the last quarter, and with quarter-on-quarter, we've been growing around that number. The YTD growth is about 70%. So, he was referring more towards the like-to-like, and that's an industry phenomenon that we've seen. For the last 4-5 quarters, apparel industry has really seen very muted growth. A lot of brands are even, they are, they have shared that their like-to-likes have been negative. So we, we are, we are doing well in the sense that we are building, you know, we are going for expansion.
We have 62 stores now, and we look at ending this financial year with 75 stores.
Thank you. That's it for me. Thank you.
Thank you. Before we take the next question, a reminder to participants to please limit your questions to two per participant, so that the management is able to address questions from all participants in the conference. We take the next question from Rishi Modi, from Marcellus Investment Managers. Please go ahead.
Hi. Am I audible?
Yes.
Yeah, so my first question is to Saumen. Saumen, you, last year mentioned that this year is going to be a more consolidation phase for the eyewear segment, and, we've seen we have not added a lot of stores this year. So if you could just give us some qualitative understanding of what are you doing behind the scenes to get this to become a sustainable business? What are the low-hanging fruits? Where can you cut costs? Where are you seeing the growth? How are you going to go for these initiatives? If you could just give some qualitative feedback on this.
Yeah. Like you said, this year, we began with the, you know, the view that we need to sort of make those 300 odd stores that you opened in the previous 24 months, because we were in a rapid expansion spree. I also did say two years back that we'll reach a, you know, a number of 1,000 stores as a network, but we realized that as much as it is important to expand footprint, but we also have to make sure that every such investment yields the required return, both for us, wherever we're investing, or for our partners. So therefore, the focus mostly was to make sure that the network starts delivering. And so that said, we are not—we did not mean that we will not expand at all.
We actually added about 65 stores, but pretty much about 40, 50 stores also we had to sort of deal with because of the wrong location or various other things. So overall, network count has not significantly changed. And, probably, sometimes in the early part of the next year, we'll begin the expansion, but it will again be looking at a catchment and need to be more concentrated around the top 25 cities, rather than going wide and deep. That is as far as the network or the footprint is concerned. As far as overall business is concerned, I think that we had a relatively higher growth target for the year. I think 22%-23% is what we began the year with. And first two quarters, we had 12% and 16% respectively in terms of growth.
Quarter three, as I explained, that we faced unanticipated, you know, headwind. As I explained, it also seems like an industry level phenomena. So we did not see growth in this quarter, and which reflected definitely on the bottom line, because rest of the things we are okay, but top line directly cascaded down to the bottom line. So we would believe that it is not a long-term phenomena. It is probably a 3-4 months window, and it would change. Therefore, our overall ambitions for the category remains strong and positive.
So, Saumen, just to clarify, right, if I understand, our front end has some issues, or some stores are in the wrong location. Apart from that, are there no issues in our inventory, supply chain, manufacturing, those are all sorted out according to you?
Absolutely. Absolutely.
Okay, fine. All right. My next question is to Suparna. Suparna, if you could just give us an understanding of, firstly, how are you seeing the wearables division grow now that it's crossed INR 100 crore top line? How much potential is there? What's the propositioning that we are offering, versus the more integrated players? And as well on the analog watches.
Yeah, hi.
Sure.
So, wearables, we closed last year with more than INR 500 crore turnover at consumer price level. And this year we have seen phenomenal growth of Fastrack Smartwatches. And this has been both on our own on-ground channels as well as in marketplace e-commerce. And we have actually, from quarter one to now, gained a market share. We used to be about 5-6%, now we are at 8-9%. So we have gained ground. This is on the back of very well-timed, good product quality. In fact, our market returns are among the lowest very well styled products in the INR 1,500 to INR 3,500 to INR 4,000 range.
We also had a very big campaign within quarter two, which kind of gave us a lot of visibility on Fastrack Smartwatches. Going ahead, the game will be played both from Fastrack Smartwatches, which will be in that rough ballpark, INR 2,000-3,000 rupee price range, as well as with Titan Smartwatches, which will be roughly the INR 8,000-15,000 price range. There will be more differentiated product with a lot of technology built in, which will be, you know, under the brand name Titan. This will actually get sold more, either in mobile stores or in our Titan World stores. This is a smaller, more niche group of customers, that some people who are really looking for more features and a better app experience, et cetera.
So overall, we see that, this business will, almost double in the next—like it continue to grow 80%, around 70%-80%, every year. And, this overall strategic plan leverages our strength of brands, of channels, of technologies. We have our own, Titan Smart Lab in Hyderabad. There's more than 80 engineers who are working on a lot of differentiated products as well as apps. And so that's really the plan for wearables. For analog watches, the growth has been... continues to be quite good, and it is across, channels. We have our own EBOs. Last year doing quite well in, large format stores as well as marketplace e-com.
Premiumization is the big game there, and we are doing very well in brand Titan as well as international brands, which are in the higher price point. Quarter three was an important quarter, where we broke some new ground with the launch of two sub-brands, Vibe from Fastrack, which is a young women's fast fashion kind of watch brand, sub-brand, and Poze from Sonata, which is the mass brand, which is for both men and women. And these are offering very good styling at reasonably good quality at very attractive prices. This has opened up a lot of, helped us acquire a lot of new customers at the more affordable range.
So it is, in a way, again, it's a twin strategy, acquire new customers, both fashion-oriented at the lower end, and continue to get to ride the premiumization wave with high margin and highly desired brands like Titan at the top.
Okay, so premiumization is working well for analog, so we got a tailwind there. Wearables, are we profitable if you look at it as a standalone business?
Yeah.
... How are the margin profiles for analog versus wearables?
So we are not really fussed about profitability. We can make a profit, we are break even, but we do want to invest. So if these are very considered calls of continuing to invest, there is no hurry for us to break even immediately or make huge profits. But the fundamental profile of the business is gives us enough room for profitability.
Okay, so the unit is, so you all are using up the not, not coming in.
Repeat. Could you repeat that? Your voice is crackling.
Yeah, just confirming, that the unit economics for profit is there for wearables. You all are just up-fronting the investment, maybe through marketing or, tech investments, that's not bringing profitability right now. Okay, fine. All right, that's it from my end. Thank you.
Thank you.
Thank you. Next question is from the line of Daria from ABG. Please go ahead.
Am I audible?
Yes.
Thank you very much for the opportunity. Actually, my question was more related to primary sales made to L3 franchises. So this was a follow-up question, maybe on the UCP. So I just wanted to understand if you can shed some light on how the new stores perform in terms of sales made to them, the total primary sales, and how are their turnovers and inventory for the first couple of months?
So, when we say primary, we actually... It's not so much new store. There'll be a few new stores, but a bulk of that is to existing L3 partners, who stock up or stock down based on the season. So in this quarter, because it was a festive quarter and the festive season was late, the primary effect that usually happens in Q2 didn't happen and happened in this quarter. And whatever they have up stocked, it's as per their norms. It's not something that they have stocked up and they are going to return back. For new stores, new stores, are stocked as per the norms based on the absolute turnovers we expect to see in year one, and a minimum threshold is put there.
So most of the primary versus secondary difference in growth that you're seeing is nothing much to do with new stores, as much as to do with existing L3 partners either having stock norm increases because of the, their business has grown itself.
Okay, I understood. Just one clarification. You said that for new stores, it is basically the sales which you are expecting, plus some additional stock which they are keeping?
Threshold. No. See, you need to have certain mix of products in any store, whether it is daily wear, whether it is occasion, light occasion, chains, finger rings, earrings, blah, blah, all of that.
Okay.
There is a certain assortment mix which is needed for a store, below which it doesn't make sense to put up a store at all.
Uh.
Thereafter, if the top line is likely to be much higher, we might actually increase it beyond the threshold. That's what I meant.
Mm.
So it's not sales plus something additional, it is an absolute assortment, which can be flexed upwards, depending on the projections of that particular store. It depends on the catchment.
Okay. Okay, all right. Thank you very much.
Thank you.
Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Thanks for taking my question. Just extending to the previous participant's question, as we are opening more L2, L3 stores right now, is it fair to believe that the payback period, including the working capital, would have improved in a positive manner in the recent years? And if you could remind us what that would be.
Payback period for an L2 or L3 franchisee? Yeah, it's, it's pretty good. Typically within two years, not payback, let's say, they would start making EBIT positive within two years, and within three years, they would, I would think, have a payback. L3 may be slightly different because they don't look at payback from an inventory point of view. They look at it more from the investment that goes into interiors and property and so on and so forth.
And-
But yeah, it's pretty attractive, and it continues to remain attractive because overall size of the business per store has gone up.
Understood. Ajoy, again, a second question on the jewelry business only. You know, just to get a better perspective on the demand conditions right now, especially you said that, you know, January seems to be better than where we were in December. Now, when we look at the gold prices, they have not really come down. They are at the same levels broadly versus where they were, where they ended in December. So is it fair to say that... I mean, is it one of these three, that either the customer has accepted this high gold price and is, you know, coming back to the stores, or the customer is very excited about the upcoming wedding season, and they are coming back to the stores?
Or is it that, you know, we are making necessary investments like we did in the previous quarters in terms of getting the customer back to the stores, and it is much higher than where we were earlier?
To be honest, I also can't give you a firm answer, but I think the first point that you raised is the more likely, where customers start accepting that this is the new price of gold. In general, I think December, a lot of travel, a lot of share of wallet, expenses going here and there is also a hard reality. For whatever it's worth, January is certainly not at all like December, and thankfully so.
Would it be-
I wouldn't give too much weight to because it's difficult to gauge. I don't see anything significantly, you know, driven by wedding or whatever. That will happen as it keeps happening.
Understood. Thank you, Ajoy.
Thank you.
... Thank you. Next question is from the line of Tejas Shah from Avendus Spark . Please go ahead.
Hi. Thanks for the opportunity. My first question is for Ajoy. Ajoy, you mentioned that you step up investments tactically sometimes to respond to competitive pressure. So what is the nature of this response? Is it more discounts or ad spends or something else?
So usually, it'll be a combination of both. Offers could be there, exchange can be another one, gold price, protection plan, if there is a lot of volatility, and we hear also from customers staying away. We try, some of them may work, may not. Marketing, yes, that's also another piece which we do, but marketing typically would be around this particular offers or promotions that we may run, whether exchange or otherwise. And marketing is also somewhat strategic, where, let's say we see that wedding needs to continuously be on as an always on, so we are continuing to invest. And we even if the season is up or down, we may say, "No, let's sustain it," because suddenly you might find that rush of people coming in. But it's a mix of all these three.
Got it. And the second question, more the results that we have seen, which have been reported for the quarter in lifestyle retail so far. We are witnessing a very sharp demand deceleration for many categories, and some companies have called out or attributed this to very high base, which was created last year because of COVID bump up. So are we seeing any such base effect in our numbers? And how are we reading consumer sentiment for near to medium term?
Firstly, the income classes where different industries and different companies particularly operate would have a great bearing on the question that you're asking. So we're seeing a lot of slowdown or sluggishness in staples, in motorcycles, whereas cars, particularly the SUVs and above, are doing exceedingly well. A Titan Company's broad customer base is in the top part of the income pyramid, and that has generally played out well for us over the last many years. The substantial share of jewelry business in our portfolio, and jewelry is not an indulgence product, it is a store of value also. In a category where the market share is low and the acceleration of formalization is also happening. So in a way, the performance of Titan Company over the last many quarters has been better than some of the examples that you're citing.
And in a way, it is continuing. If I look at some of the results which have come up in the last couple of weeks, it continues to reinforce that. And our own performance in jewelry in Q3, while it was slightly lower than Q2, it was actually overall strong, if you look at the portfolio of jewelry. Our performance, sales growth, performance in watches was also very strong. It's in EyeCare, it's in same-store growth of Taneira, it's in the perfumes business. International, it's been very strong. It's in EyeCare and the other two that, you know, we've had some challenges. And these need to be seen, you know, finally, a quarter is just three months. So from a lifetime of a brand, and I'm not here talking about a long lifetime, but from a two, three-year timeframe, a quarter is still only a quarter.
Our overall confidence is very high, and it's a combination of, you know, three factors. One is the prediction on the growth in these top income class segments over the next few years, when we move from 2,200 to 5,000 per capita GDP. It's actually a very high growth rate of these two top two income segments, in fact, even the third income segment, and therefore, we're going to get a tailwind from that. The second is, in most of the categories in which we operate, our market share is still single digit, and combined with the acceleration in formalizing, that's another, you know, tailwind that we are seeing. The third is that our natural behavior and strength in terms of going deep into Bharat with all our brands is accelerating, some of the town names I mentioned.
So considering all these three things, our overall outlook for medium term, which is FY 2025, FY 2026, continues to be very strong. We need to become better in managing our operations and extract more value from the scale that we are actually generating. That is going to be the focus, certainly for the company and all divisions for FY 2025.
Thanks for a very detailed answer. Thanks, and all the best.
Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead.
Hi, team. A quick couple of ones. One, on the gold price premium, Ajoy, you know, the commodity premium, you know, where is it currently? And do you still think, you know, there is significant corrections you need to make over the next 12, 24 months, you know, in the context of accelerated formalization and, you know, the existing brands also expanding, et cetera? The reason I'm asking because, even in a very competitive market like Chennai, as I understand, I think still there is a 1% premium, which you still manage to, you know, hold on to.
Yeah. So we still do that. We have a premium across markets, and it varies in different markets. We think we can continue to hold on to that premium because that small percentages, whatever they are, Chennai notwithstanding, I think the customer is willing to give that premium for Tanishq and the reliability, as well as our exchange program and so many other transparent-
...trustworthy practices that we follow. So we think we can continue to hold. Of course, if the, you know, the rest of the market goes down further, then we will have to respond. But I'm not seeing so much of that happening unless, and until there is some increased amount of smuggling and other such things that come into the market, which I can't really say. So as of now, we think we can continue to hold onto the small premiums that we are continuing right now.
Okay, very clear. Is this hypothesis will it hold good, you know, even in a scenario of, you know, let's say, full-fledged actual implementation of hallmarking on the ground, including inspection, et cetera?
Yeah, I don't think that hallmarking. Actually, hallmarking has not driven this. I don't believe hallmarking is the one which has created this. It is just price warrior approached by different players.
Okay.
hallmarking is not the driver.
Secondly, you know, when we look at the medium term now with 100% ownership of CaratLane, you know, how do you look at both the brands, CaratLane and Mia? You know, the, the... Do you really think you need both of them targeting different, you know, consumer, you know, let's say, requirements? Or, sometime in the medium term, is it, have you thought about it, saying that, "Look, you know, is it, like, better to focus on actually one?
Actually, I've maintained this earlier also. These are two, you know, two horses in a multiple horse play. There are many, many players in this, and this segment is growing. Both these, both these brands are not only growing, but are also very profitable. So actually, it helps us. In fact, even Tanishq plays pretty much in the everyday space, significantly in the diamonds. So if you ask me, there's Tanishq, there's Mia, and there's CaratLane. And as more players come in, in a given catchment, in a given market, if we are the dominant player there, in a segment which is evolving, it's, it's great. Thirdly, the psychographic profile for each of these customer segments is very different. Even the product language is different between Mia and, let's say, CaratLane. Mia also has a lot more of 14-karat.
CaratLane has a different kind of profile. So I think, if you... And if you visit each of these, each of our formats and look at each of the product mix, you will find that there are some overlaps, but there are also some certain areas which each brand is very, very strong in. So I think as long as the brands are profitable and continue to grow, which we are seeing very good growth and good brand profitability, we don't see any reason to, you know, consolidate or try to... And anyway, there are separate teams running each of them.
Very clear. Just quickly, you know, between Mia and CaratLane, what would be broadly the, let's say, the proportion of consumers, you know, who would have shopped at both or, the loyalists, what I'm trying to kind of get at. Is it a significantly higher number or, you know, is it largely driven by both brands are growing by, let's say, you know, outside of or, let's say, getting newer consumers into your group?
I would instinctively feel that they are getting new consumers. The overlaps are not so much, but I don't have data to kind of... Between Mia and Tanishq, there'll be overlap because Mia is a sub-brand of Tanishq, and it's also available in the Tanishq store. So a lot of gifting, you know, older customers buying for a younger person, et cetera. I think CaratLane and Mia probably will not have too much overlap, but I'm just giving you a very top of the mind answer.
Thank you. And with one quick one, if I may. You know, when I think about the next 12, 24 months, is it fair to assume that nearly 100% of your incremental expansion in jewelry will happen through L3? Given the, you know, state of balance sheet currently, it's still very strong, but with debt, et cetera, you know, is it fair to assume that you will actually dial up the L3 route, versus, let's say, the last couple of years?
Not really. We, we are actually pursuing more L2s. L3s are for certain markets. It's small, remote, and so on. In fact, L2 makes more profitable sense for the company, is what our understanding is. Capital efficiency could vary, but I don't think... I mean, Ashok, maybe if you want to add anything.
There's nothing significant shift we expect at this point of time. I think the same ratio is likely to continue.
Sure. Sure. Thank you. Thank you so much, and good luck to you.
Thank you.
Thank you. We'll be able to take one last question. We take the last question from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks. So in an earlier question, you indicated confidence about growth in FY 25 and 26. So is it fair to say that you're confident of delivering the 20% CAGR in jewelry which you aspire to deliver?
Yeah. I mean, that was something which we shared in that Investor Day one, no, which, where we had given some kind of-
Yes. Yes.
Yeah, of course, we... Yeah, yeah, we continue to see positive signs there, and we will continue to...
YTD growth rate is-
YTD growth is in that range anyway. Even though last year we exceeded the CAGR goal that we gave you in the five-year or four-year horizon, we had actually exceeded it, and despite that, we are continuing to grow at this CAGR equivalent rate.
Yeah, but you don't see any headwinds? I mean, like, we are seeing headwinds in some other categories. Maybe other categories have slowed down, but, like, for jewelry and for watches, you'd think the growth rate should continue.
Our FY 2027 guidance, which we presented in our Investor Day, remains same. You know, there is. And we are not at all worried about that. Actually, the first two years of that five-year horizon has turned out very well. We are. We believe we are comfortably placed to kind of eventually-
... achieve that while it is up, while it is a bit of stretch, but we will achieve that.
You need to, you know, really deeply consider the sector, you know, dynamics, the competitive position of each of our brands, and in this case, the jewelry brands in the sector, the customer profiles that we are targeting versus some other sectors, the very low market share that we have compared to other companies in other sectors. Store of value aspect of this category, as opposed to something which is seen as expenditure. So many things, and the status aspect of diamond jewelry as India becomes-- Indians become more affluent. There's so many factors which are in our favor, and that's why our confidence as against maybe some other sectors and some other companies.
Sure, that's very clear. Second and last one is now that you own almost 100% of CaratLane, does anything change in the way you're managing it? And also will it remain a subsidiary, or would you look to merge it with the parent company?
Actually, nothing has changed. Everything remains the same. It's a separate brand. It's a separate organization. It's a separate leadership team, which is governed by a board, which continues to be the same board, you know, for a while now. And there is no plan to merge it into Titan.
Just to add, there is enough cross-learning and sharing of whatever, help is needed from either side, and that continues as is. In fact, it can only improve.
Understood. That's it from my side. Thank you.
Thank you.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. C.K. Venkataraman for closing comments.
Thank you very much, everyone. It was a wonderful conversation, and see you soon.
Thank you very much. On behalf of the Titan Company Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.