Ladies and gentlemen, good evening, welcome to the first quarter earnings conference call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion by the company's management on the Q1 FY 2024 performance, followed by a question and answer session. We have with us today Mr. Ashish Dikshit, Managing Director, Mr. Jagdish Bajaj, CFO, Mr. Vishak Kumar, Director and CEO, Lifestyle Business, Ms. Sangeeta Pendurkar, Director and CEO, Pantaloons. I want to thank the management team on behalf of all the participants for taking valuable time to be with us. I must remind you that the discussion on today's earnings call may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risks that the company faces.
Please restrict your questions to the quarterly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you, and over to you, sir.
Thanks. Good evening, welcome to the Q1 earnings call of our company. Let me start with the highlights of the quarter by setting the context for industry during this period. The consumption slowdown that the discretionary category we started to witness for festive last year continued during this quarter as well. In such a challenging environment, the business posted growth over last year, driven by performance across our established businesses, aided by new business additions that we made during the last year. It is important to note that amidst these continued challenges in the demand environment, our performance has been driven by rapid and agile responses to the changing market conditions, along with effective execution of our growth strategy through brand building, network expansion, category extensions, and portfolio enhancements.
Now, I will talk about financial performance of our company for this quarter. The company delivered revenue of INR 3,196 crore, which reflect a growth of 11% over same quarter last year. Our standalone revenue grew 8% over last year, reaching to INR 2,987 crore. The company achieved a consolidated EBITDA of INR 353 crore with 11% margin. Our standalone EBITDA margin stood at 14.2%. EBITDA for this quarter was impacted due to subdued sales, along with high fixed costs and accelerated marketing investment. Consolidated margin was further lowered by aggressive growth investment in subsidiaries, mainly TMRW, which was not in the base last year. The company's consolidated PAT was negative INR 162 crore, which also include a negative impact of Ind AS 116 on the net profit.
Our store network is now over 4,000 stores, expanding across a total retail space of 10.9 million sq ft. We have also continued to ramp up our digital capabilities and enhance our omni-channel play, as visible in our e-com performance, where our sales grew 12% YOY. Our digital portfolio got augmented with the addition of TMRW brand that continued to build value through strategic and operational improvements. I will now take you through the performance of our individual businesses, starting with Lifestyle Brands . Quarterly revenue for the segment was INR 1,594 crore, which is 5% higher than last year. EBITDA stood at INR 292 crore, reflecting a growth of 10% YoY. EBITDA margin stood at 18.3%, an expansion of 80 bps over last year.
For the quarter, retail channel remained resilient with 2% growth over last year, while wholesale segment showed a robust growth of 20% YOY, led by growth in creative and departmental store business. We also have reached a significant scale in our women's wear business in LP and Allen Solly brands, where the size of the business is approx INR 400 crore on a full year basis. The four lifestyle brands continue to enhance their leadership position in the market through focused and sustained product innovations, new category extensions, which include MBCS bets on non-natural categories and investments in marketing and brand building. Let me talk now about Youth Western Fashion brands, which consist of American Eagle and Forever 21.
American Eagle witnessed yet another quarter of strong performance, with 49% revenue growth over last year, led by strong distribution expansion and attractive product propositions for our customers. The brand added three new stores to the network and is now available at 40 exclusive brand outlets and more than 65 departmental store booths. Forever 21 continues to work on improving its operating KPIs and scaling its network through asset-light expansion. About Reebok. Fully integrated with ABFRL now, Reebok is off to an encouraging start this year, with quarterly revenue, revenue showing a growth of 43% over last year. This has been achieved at the back of 11% LFL, aided by an aggressive footprint expansion of 10 new stores this quarter, along with strengthening its departmental store collaboration and marketplace work partnerships.
We are confident that Reebok would be another large and profitable addition to the repertoire of 4 brands within the lifestyle brands portfolio. Going on to the Pantaloons business, I would like to recap how post-festive last year as the discretionary consumption slowed down, we observed the first sign of slowdown in the value part of the market, mainly in the lower tier towns. The impact still continues this quarter as well, impacting the performance of Pantaloons. Pantaloons recorded quarterly sales of INR 1,030 crore with an EBITDA margin of 13.4%. This quarter's margin was affected by lower sales in the difficult market conditions, which created an adverse operating leverage on a large network of stores.
We expect the margins to improve as the market recovers. The network expansion journey for Pantaloons continued with 3 new stores added during this quarter, ending with a total of 434 stores. Pantaloons continued to expand its private label portfolio with new launches, filling distinct spaces. Further, our value brand, Style Up, continued to expand its network, with 5 new stores opened during this quarter. Let me now speak about innerwear business performance. The business in Q1 FY 2024 posted a retail LTL of 3%, despite slowdown in outerwear segment. During the quarter, brand Skinner reached to exit with 32,700 trade outlets. The Collective and other super premium brands witnessed a sharp growth of 16%, with 16% LTL growth over last year's same quarter. Ethnic businesses this quarter achieved a revenue of INR 134 crore, and it grown 33% year-on-year.
Businesses continued to invest in brand building initiatives and new store openings, with net additions of 12 stores during the quarter, which led to margin getting impacted for this quarter. Sabyasachi grew 18% YOY, led by strong performance in jewelry and accessories segment. The new Mumbai store launched in April, is witnessing good consumer traction. Staying committed to its ambitious expansion strategy, our men's premium ethnic wear brand, Tasva, is now available in 58 stores across more than 30 cities. Jaypore continues to expand its store network with additions of 2 stores during the quarter, and now has presence in 20 stores. Shantanu & Nikhil posted growth of 20% over last year's same quarter, with its revenue growing to 1.6x over last year. The portfolio is now well-balanced between couture and bridge.
House of Masaba added 3 stores to the network and posted 32% revenue growth over last year. By capitalizing on the strength of our robust performance brand and their diverse category expansion, our ethnic wear portfolio is poised for accelerated expansion. Let me update you on the TCNS transaction. As you already know, ABFRL board has approved the acquisition of 51% stake in TCNS Clothing Co. Limited, through combination of share purchase agreement with founder promoters and a conditional public open offer. The proposed acquisition is on track and under progress. The company has received requisite approval from the regulatory authorities and is in the process of commencing the open offer. To conclude, despite challenges in near term, we expect the market to rebound in second half of the year following the festive period.
As the industry recovers, we remain committed towards expansion of our retail network, extending our brands, leveraging our strong consumer base, and delivering our value proposition. Thank you. We are open for questions now.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your 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 Nihal Mahesh Jham from Nuvama. Please go ahead.
Yes, good evening to the management. The first question was on Madura. Despite the negative LTL, the margins have improved. Is that maybe a moderation in the sales and marketing or anything to do with the channel mix, just to clarify?
Hi, Nihal. Largely driven by cost reduction initiatives, we knew that it's gonna be a, you know, less number of wedding dates, quarter, et cetera. There was a lot of, you, preparation on cost reduction. That is primarily why the margins have been strong.
That, that is mainly the sales and marketing or overall amounts of advertising?
No, actually, on advertising, we spent pretty much in line with, our normal quarter trends, so it was on other expenses that we were able to tighten.
Understood. My second question was on the TCNS acquisition, you know, not related to the quarter, was that, from May, obviously, a decent amount of time has passed, and I think TCNS also records, reported a bit of a muted performance in, in Q4. While the quarter is not a reflection, but just wanted to understand incrementally, any further comments on how we plan to turn this brand around in terms of the growth? It would be helpful if you could just comment on that.
Nihal, this is probably a bit premature for us to talk about it. Let's get the process complete. We, we, of course, have our thoughts around it, and that's why we moved forward with this acquisition, but too early for us to comment on it.
Sure, Ashish. Final question was, if you could give the debt number and also the expected losses, both from Tamara and the Reebok business for this year. I'll come back and get you after that.
Reebok, we don't expect any losses. Reebok is a profitable business on a full year basis. On, Ashish, debt on thirtieth June, net of cash is INR 2,100 crore.
Net, net debt was INR 2,100 crore, sure.
As on thirtieth June.
Okay, the losses from the TMRW business for this full year?
For full year basis, it probably will be in the range of INR 80-100 crore.
Sure, Ashish. I have a few more. I'll just come back. Thank you so much.
Thank you. The next question is from the line of Varun Singh from ICICI Securities. Please go ahead.
Yeah, thank you. Sir, my first question is on Pantaloons. Given 17% retail expansion is very healthy, but still a 1% revenue growth and 8% L-...I understand that, I mean, the discretionary slowdown impacting the business, earning usage, et cetera. Still, given we have cut down on our store addition guidance also in previous quarters, I mean, you wish to share anything? You think there is a need to change our overall approach towards the business with regards to private label, et cetera, which is now currently 60-65% in the store? Anything you wish to share over there, given general quarter of under performance in Pantaloons compared with year?
I just get Sangeeta to respond to that. Yeah.
Yeah. Hi, hi, Varun. If you see our performance, and if I just take you back a few years in terms of how we looked at the Pantaloons strategy, while this quarter and, you know, the last two quarters have been a bit of an aberration with the economic slowdown, you heard Jagdish talk about it, and I think the industry is faced with the same issues. Overall, when we looked at our private label strategy and the overall strategy a few years back, we had seen a significant improvement in terms of our performance, our private label strategy, in terms of strengthening our private label, improving the price-value equation, launching new categories, putting in new labels to occupy the white spaces that existed in our portfolio.
In 1920, if you recall, we had done a lot of those actions, and they yielded some really good results. In fact, if you see our margin in FY 20, keeping the COVID years aside, even in FY 23, the first 9 months, our margins were very good margins. I think it's post Diwali, November, December, that we started seeing a slowdown. I think we feel very confident of our strategy and our proposition. Private label portfolio continues to improve significantly. I think we, we hear that feedback from consumers all the time. Equally, in terms of improving our store experience, the fact that we put in a new retail identity, new branding, we see those stores performing relatively better compared to the rest of the stores in the network.
I think on, in terms of our strategy, be it private label or overall Pantaloons strategy, we stay pretty confident and sanguine. I think these last 2 quarters are more mired with the fact that there were 2 aspects that are really the cause for this. One is the general macroeconomic slowdown, and 2, you also saw some yarn price increases, which impacted, again, the entire industry, during 2021 and 2022. With the yarn prices settling down, we've had a chance to correct the prices of our private label, and that gives us even more confidence that our price value equation, if anything, will be better in the quarters to come. We should look at these 2 quarters differently. If you look at our performance in the first 9 months of last year, our margins have been very strong.
These two quarters, because of the reasons I explained, our growth and therefore our margins have got impacted.
Understood. I mean, more than the worry on margin, revenue, higher revenue growth should be leading towards kind of more excitement. Having said that, I understand price value equation that you talked about, and I, I, I'm more than hopeful that that should work. My second question is, again, in Pantaloons, like, the total number of stores that we have, around 434, what percentage of stores will be more than 3-4 year old?
What percentage of...
Yeah. If you look at it, we'll give you the exact number, but if you look at it, last year, we added net of about 55 stores. In the prior 2 years, because there was COVID period, we would have added respectively, maybe 30 stores a year kind of number.
Right.
2...
Two, okay.
back to third.
In last, our network was. How many stores did we open?
120 stores.
Okay. In last 3 years, we have added 120 stores.
Okay, got it. Just a last question about in ethnic wear business, even though revenue growth looks very much healthy, but the losses, the losses have mounted significantly. If you wish to talk about how should we expect this number to pan out on a steady-state basis, if you can give us some understanding on that front. That is from my side.
In ethnic wear businesses, this quarter was particularly compounded by the fact that the wedding dates were few. As you know, a large part of ethnic wear business, not the regular ethnic wear, but most of the designer ethnic wear, including Tasva, which is a recently launched concept, is largely related to wedding dates and wedding consumption. That period has seen very few wedding dates last quarter, and that has affected the performance of ethnic wear. This quarter, it was also compounded by a big launch that we did, where Sabyasachi's largest store in India and Mumbai was launched, and there was therefore a one-time large marketing investment to promote the launch of the brand in the store. These 2 were of slightly exceptional nature.
I think going forward, Tasva is the only one which business which will require large funding for first few years. Rest of our businesses are profitable in ethnic wear portfolio on a full year basis as they play out.
Thank you, Jagdish Sir.
Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. My first question also remains with regards to the Pantaloons business. You know, while we agree that, you know, the last three quarters have been challenging in terms of the overall demand, but, you know, at the same time, we have been-
Can you speak up a little? Your voice is breaking.
Hello. Sorry, is this better?
Yes, much better now.
My question is with regards to Pantaloons again. I mean, I do understand the fact that, you know, Pantaloons has been impacted because of the slowdown that we are seeing over the past 3 quarters. The only question here is with regards to the margin, you know, like what we have done for Madura. You know, we have been able to save costs there. Are there any initiatives or strategies that we are, you know, implementing to at least control the cost in the interim until the demand kind of pick up?
If you see the performance over the quarters, Q4 was similarly affected by similar phenomena, our margin had fallen quite dramatically. We have taken sufficient measures, therefore, the improvement in margin from Q1 over Q4 reflects large part is the cost saving that the costs related efforts have done. I would also call out and say Pantaloons is a larger fixed cost business, rental being a pure retailer, rental being a very large cost in running store operations. Therefore, there's limitation on to what extent can this cost be dropped down. Efforts are on, as you can see, see in the, in the shift of expenses, of profitability between these two quarters itself.
Yes, sure, sir. Sir, also in the event, you know, when we are seeing this overall slowdown in the overall apparel consumption, and we are, you know, kind of continuously adding stores as well at the same time. Is there any thought, you know, given the fact that our debt is already around INR 2.1 million right now, net debt that is, so maybe we can go down, slower on store expansion bit in the interim, and maybe once, you know, the situation gets better and the business starts, you know, contributing profitably again, maybe then we can expand the store, again. Any thoughts on that front?
We have 2 kinds of expansion models. One is our own capital, and second is franchisee-led. As you know, many of our established brands are able to get a lot of franchisees to invest in that, and that's been a primary driver of growth. In fact, that has been practically free from capital-related issues as far as growth is concerned. There is a part of the business, the new brands that we are launching, Pantaloons, about 70, 75% to 80% of stores, which are largely capital-led, and there we'll moderate as we go along. We had indicated our Pantaloons expansion, which was 60 stores last year. We've talked about 35, 40 stores. To that extent, some of it's factored in. Remember, store expansions are long-term projects.
Typically, a store lives itself as 9 to 10 years, in many cases, 12 to 15 years. We don't want to also alter that dramatically for 1 quarter here and there. Our larger strategy is built around the pieces of consumption in this country, our ability to build strong brand, our understanding of the apparel supply chain and ecosystem, and ability to build large capital-efficient models in the business itself. We are, of course, going through a phase of rapid investment through portfolio expansion, acquisition of new brands, which we've done in the last 3, 4 years.
We acknowledge the, the stretch on the balance sheet, but I think as far as operating businesses are concerned, we see the large runway. We'll continue to grow them through this period. Wherever there's slight moderation required, like this year, we are doing that already.
Sure, sir. Thanks for the detailed answer. Just one last bit on on the ethnics piece from end. Sir, how would you rate your performance so far in the Tasva piece? Do you feel, you know, the, the business model is now perfected and, you know, we can now expand it very rapidly as you know, we have been doing seven, eight stores a year? Or still, you know, the, the template isn't still fine-tuned, and maybe maybe we can go a bit slower on the expansion, first get the template right, and maybe we can go aggressively thereafter.
As we had said, in last, from the time we have launched, last year, we added close to 50 odd stores. We expect to add another 40 stores this year, roughly. I think, as far as the performance of the business is concerned, we'll have to see one good festive period. There's a lot of learning as we are expanding and experiencing. There is a great amount of consumer feedback. We are learning from that to constantly improving that. I think, by the end of this year, when we would have seen a one full wedding period, which is likely to start in second half of this year, and have had a reasonably large sort of geography through which we have experienced it, we will decide how to moderate that pace or increase that pace.
At this point of time, our plan to open up 40 stores is what we had said in the beginning of the year, and we are sticking to that.
Thank you, sir. That's all from me.
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, good evening, sir, and thanks for taking my question. I also have a question on Pantaloons, this is slightly a longish and it's more or less a, like a strategic question. Now, since acquisition, we have definitely scaled up this brand, improved return metrics, so far, we've not really seen a good year of LFL growth performance. If I look at sales per sq ft metric, right now it is trending below 8,000, and for a value fashion brand with lower gross margin, I mean, this probably is among the lowest when you compare with other value fashion retailers. Any thoughts here? I mean, in the current context, there has been only increased competition with likes of Reliance and Zudio, even Shoppers Stop is now entering. What is your take?
How do you look at, you know, improving the sales throughput metric here, if that is a KPI that you look at, at all?
We look at many KPIs. I think you've mentioned some of them. I think you will be missing the bigger picture if you don't look at the ones that matter. The ones that matter are return on capital and EBITDA margin. When we took over this business, as I said, over long period of time, not short periods, long period of time, we improved, consistently improved margin, got to 17%-18% EBITDA margin before COVID. In 2019, 9-month margin was 17.5%. Even last year, 9-month margin was 17.5%. As Sunita explained, last 2 quarters have been sort of slightly affected. We have achieved all this on a very low capital employed base. Our overall capital employed in our 4,000+ core business is between INR 400 crore-INR 500 crore.
It remains a very strong business in terms of returning capital in good times. Of course, unfortunately, both during the COVID period and subsequently in the last two quarters, the markets haven't been very supportive at this end of the market, and that's reflected in our last two quarter performance. I would call out, you know, our H1 performance last year was about 18% EBITDA margin. We run this for a INR 4,500 crore business at INR 500 crores of total capital employed. I think it's a fairly good attractive proposition. As we come out, you will see currently we're experiencing negative operating leverage in times like this. The same situation reverses when markets pick up, and we expect the second half of the year to reflect that.
Just a follow-up, sir, here. When I look at improvement in return profile over the years, has the low LFL growth, you know, been an output of that strategy where we have let go of formats or let go of some loss-making, dead stock, higher dead stock kind of problems? It's a reflection of that, or LFL growth, I mean, among the three pieces, LFL growth is one piece that we haven't delivered, and rest two we have delivered, so it's okay.
No, I, I, I think I would again say, focus on what truly matters. In a country like India, where there is a constantly shifting retail landscape, you're building new stores, markets are shifting from one place to another. Sometimes old stores are very profitable, and yet you need to shift trajectory. In a business format like Pantaloons, where there is large number of sort of 15, 20 years of store addition that has happened, there is always a pressure on some markets which are evolving into new markets. Therefore, LFL sometimes truly doesn't capture the overall picture. Also, the sales productivity number that you called out is primarily as a function of geography that you operate in. We don't look at sales productivity as a common average across industry.
We look at sales productivity in the relative market that we operate and what are the competitive, sales productivity in those markets. All these therefore becomes very nuanced sort of numbers, and therefore, the primary thing, which is EBITDA margin, capital employed, return on capital employed, are primary drivers as far as we are concerned. Intermediate metric, metrics sometimes may tend to sort of give picture which is not clear.
I got it, sir. Very helpful. I'll move on to the next question. I'm looking at this other businesses in Madura, and basically, this is Collective, American Eagle, Forever 21, and the Innerwear Athleisure business. Apart from Reebok, there is not a recently acquired portfolio here, and Collective this quarter has also done well. I was just wondering why this portfolio should be a loss-making portfolio, even at post-industry EBITDA level?
Innerwear and Forever 21 are two businesses which, for different reasons, just to mathematically conclude that story, are the two businesses which are not profitable for the quarter, and that's really why that number is shown there.
Sir, we have been running these businesses, like, for six, seven years now. I mean, haven't these reached a scale where, we, we still investing, but, they should, they should, at least give us some return on, on money, or no, we've not reached a stage at this point?
I think we are still further away from, as far as Innerwear is concerned, in terms of profitability. I would also say this is one quarter, but even on a full year basis, we haven't come to that stage. Forever 21, again, is a business where we haven't really got to a point of stage. We are not investing in terms of growing that business, and a large part of that business is also affected by the value end of the market. These two are the businesses which are actually pulling down the margins in that segment.
The rest of the portfolio is not enough to lift the overall margins of the segment, because Collective, I mean.
Reebok has just started, so Reebok is just sort of breakeven stage at this point of time. We expect it to become profitable going forward, and on a full year basis, most definitely. Collective is the one which has to carry the weight of this, which is not sufficient for this quarter.
Got it, sir. I'll come back in with you for any follow-ups. Thanks, sir.
Thank you. Participants who wish to ask questions, please press star and one on your touchtone telephone. The next question is from the line of Ashish Kanodia from Citi. Please go ahead.
Hi, sir. The first question is, when you talk about the consumption slowdown, and given that you have presence across price points and across brands, is there a difference in demand momentum at, say, a higher price point versus, say, a lower price point? I mean, it's partly reflective in, in Pantaloons, like-for-like number. Even within Pantaloons or within your Madura brands, do you see a difference in demand momentum, where the premium end continues to do well, and maybe the lower price points are struggling a bit more?
Ashish, yes, the difference exists, but if I were to go back 2 quarters back, we were quite clear that the premium in the market, and if we look at a longer trajectory over the last 12, 18 months, the premium market was almost resilient to the point of not being affected at all by the economic situation around. I would say that, to some extent, has somewhat changed. There is challenge as far as value segment is concerned, which continues and has actually deepened in last couple of quarters. The premium end are also not fully insulated from it, but a large part of that reason, that reason is also linked to the wedding dates during this period.
Lot of premium clothing, at least for us, both in ethnic business and in lifestyle brand, is linked to wedding dates, and that's why, to that extent, you find muted growth even in lifestyle segment, which otherwise would have been much higher. To that extent, I think there is a difference across it. The really high end of the business, obviously, is less affected, the businesses like The Collective. I would say even the designer businesses, which are more wedding-related, have seen the pressure as far as this quarter is concerned. Weddings primarily affecting the premium end of the market, while overall economic slowdown has affected the wider market, which is the mid-market and below.
Sure. Secondly, on the lifestyle brand, anything which has changed in the, in the wholesale part of the business? That, you know, seems to have certainly picked up, so, yeah, any, any change in that part of the business?
I think the business has continued to grow. Two, three factors, Ashish, which come in. One is that, you know, last year base, the recovery was a little less so in our business with department stores, so this is on that base, so that growth is strong. To some extent, Central is coming back into the business. That is, again, helping us in our overall numbers. Plus, some of the space additions that we've done in various department stores have also contributed to that growth. That's broadly the story there.
Sure. Just last bit, in terms of, you know, you have, talked about, TMRW's plan, where, you know, you will look at, some external funding. I mean, there are news flow, you know, that TMRW maybe look, looking to acquire another D2C brand. Just purely on the fundraise part, right? I mean, are you looking at any external fundraise happening, maybe this year in, in, in, in the TMRW entity?
I think difficult to predict with great sense of timing. We have committed a certain amount in investment to TMRW. About half of that is what TMRW has consumed so far in the brands that they have acquired. They continue to pursue opportunity in that sense, and we will look at maybe towards the end of the year or somewhere around that for a fundraise. It's difficult to predict with any degree of certainty about the timing for that. It's definitely something on our agenda as we go forward.
Sure. Thank you so much. That's all from my side.
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global . Please go ahead.
Yes, sir. Hi, thanks for the opportunity. Sir, anywhere our checks are suggesting that brand saying-
Sir, we can't hear you clearly. Can you try and get closer to the...
Is it better now, sir? Hello.
Okay, we'll try. Go ahead, go ahead.
Yeah. For Innerwear, our checks are suggesting that Van Heusen has taken some price cuts, as well as, the retailer incentives are also relatively higher versus prior periods. Wanted to understand, what's the strategy going on here, since we are also making losses?
I, I think price cuts and price increases are part of adjustments that will always be going on. I think last year around this time, you know, there's a price increase across all categories. Most major players had to take price increases that has affected demand at the premium end of the market, and therefore, there is suitable price adjustment that's happening. As far as the... Is that second part correct?
I said incentives are also higher. Retailer-level incentives have also been higher.
It's changing month-on-month. I don't see that's dramatically different. As a large player in the premium market, we are the only other player, other than the market leader, which is more than INR 500 crore of sales at the premium end of the market. Remember, we are even more premium on an average than any other player in the in this segment. There is obviously going to be competitive pressures, and to which we responded to various points of time. That's more a monthly, quarterly adjustment that will keep going on. I don't think there's anything structural about it.
...On the inventory position here, sir, everything is in under control. I just wanted to check if that is driving such level of incentives.
There has been, as you might know, if you've spent time, that Innerwear business consists of both Innerwear as well as athleisure part of the business. Athleisure part of the business, after years of almost 2, 2 and a half years of rapid growth, lot of consumption, work from home environment, is beginning to slow, show, show slowdown in last 2 or 3 quarters. That's why there is a little bit of excess inventory. Innerwear is, is a more evergreen product, and therefore, that's not a matter of concern. Whatever that would happen is perhaps related more to work from home categories, which is largely athleisure.
Got it, sir. Secondly, you mentioned about price corrections in Pantaloons as well. Just wanted to check, will SSG be flat in this format, or you are expecting growth in volumes to help drive positive SSG?
I don't think, I don't think these price corrections are so large that they will bring down the average price. These are opportunities to, to complete the range in some of the gaps that we felt were there. There is no wholesale price reduction, if that's what you were referring to. There may be marginal cases of price gaps, which is what we have. I don't think it would have material impact on SSG.
Got it, Mr. Dikshit. Thanks for taking the question.
Thank you. The next question is from Alok Shah, from Ambit Capital. Please go ahead.
Yeah, hi. Thanks for giving me this opportunity. My first question is on the Reebok. If I heard you right, you said that it's at the break-even scale currently and should be profitable by year-end. Just wanted to check, what are the growth plans over here, and, and, what are the targets in terms of store openings, et cetera?
Hi, Alok. Yes, you're right. First things first, it's a profitable business for us for this year. There are multiple growth levers. At first level, there is a distribution expansion itself, both in multi-brand as well as exclusive stores. We have a fairly large pipeline for retail expansion. That, that should fuel one kind of growth. Second is a whole lot of initiatives to drive, you know, throughput in existing stores, use of better technology to improve replenishment, assortment planning, et cetera, to drive growth. The third is many new products introduction of new product categories, et cetera, which will get into the stores in the next few months. That, again, should propel a lot of growth.
And, of course, a lot of leveraging of our strength in apparel, you know, to be able to drive further on the apparel sales in the sportswear side of business. Alok, all in all, many levers for growth, which will unfold over the next few years, but, you know, a lot of momentum this year itself to be able to drive profitable growth.
Got it. What will be the current store count and what will be the target, by the year-end in terms of-
We have about 120 stores, 125, 120-odd stores. That's going strong. My sense is, you know, we'll be able to add 15 to 20 stores every quarter. That's the kind of momentum we should have in the network. If all goes well, maybe 200 stores by year-end exit, if not, maybe 170, 180 stores.
This would be CoCo stores or there's a combination?
Combination. We have a lot of partner stores. We also take CoCo stores where required. It's a combination. There's a lot of franchisee interest in, in this brand to scale up, a lot of partners that we have who want to diversify to sportswear also. There are existing Reebok franchisees who want to put up more stores. It's a combination of FoFo and CoCo.
Got it. Perfect. There's some new subsidiary that, that is, supposed to be incorporated. Just wanted to check what would be this for, and what is the capital allocation for this business?
This is a new company that we have incorporated. This is for a partnership with one of the luxury brands called Christian Louboutin. We are initially putting INR 5 crore of capital at this point in time.
Okay, this can potentially go up as you think about expanding?
No, no, this is not really so good. This is a part of a broader partnership for the Galleria 5 project that's coming up. I don't, I don't expect this to be significantly, significant in our scheme of things.
Got it. Perfect.
Now, we're going to see.
Got it. Thank you. That's it. Thank you.
Thank you. The next question is from the line of Vikas Jain from Equirus. Please go ahead.
Thank you so much, sir, for the opportunity. So number one, with respect to Tasva, can you broadly outline as to like, what are the investments that... or what is the kind of capacity required to put up one new store, and what are the targets for FY 2024 in terms of stores addition for Tasva?
As I mentioned, we're talking about 40 stores for this year.
Okay.
Typically, it depends on the size of the store, but anything between INR 75 lakh to INR 1 crore is fairly the investment in, in a Tasva store.
This includes working capital as well?
No, no, this is CapEx. This is pure fixed.
Okay. Okay. sir, secondly, with respect to the debt number that you quoted initially, can you, like, broadly... of course, we do understand that there has been some weak conditions as well as scaling up of the new businesses, but can you, like, broadly allocate what was the segment, broader segments where this, the difference between quarter-over-quarter improvement of the debt was allocated to?
That number, if you're saying the opening debt for the quarter?
Quarter and the ending date of the quarter. Broadly, where was that utilized broadly in our segments?
A part of it, the difference is we started the year with about INR 1,400 odd crore, INR 1,420 crore or something, and our quarter-end debt is about INR 2,000 crore. A part of it has gone into CapEx, small part in working capital, and to some extent, the losses for the quarter.
Correct. And sir, as a follow-up to that, any number that you are working with for towards the end of the year, FY 2024, for the debt?
That we had mentioned in the previous call. For the full year, we had talked about INR 2,800 crore kind of number as the closing debt. This is after considering the payment towards 51% stake for TCNS.
Correct. Correct. Sir, if I missed it, sir, the TMRW investments are done, or is, is it like yet to be completed, some part of it was left, right?
Yeah, last year, last year, as I mentioned in the previous response, we have made half of the investment. The entire investment is factored in, in the closing debt number that I was talking about.
Sure. Thank you so much, sir, for answering this. Thank you.
Thank you. The next question is from the line of Akshat from Flutura. Please go ahead.
Hi, sir. Thank you for taking my question. My question is on the depreciation side, as it has increased significantly on year-on-year basis and also sequentially. Can you please guide as to how this depreciation will be going forward and why it has increased so much?
See, depreciation is a function of new store additions and capitalization, and the impact of India's stores, because, you know, I have to treat them as my own store. That is the reason, you know, the depreciation has gone up. It and it will continue to be in this range or rather increase, if you see from last few years. So because of the store additions plan and the early, you know, treating them in the first half of life of the stores, like after five years, the first half will be heavy on depreciation, and then it will be a more steady state like that.
Okay. Okay. Okay, sir. Thank you so much. Thank you.
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Varun Singh, from ICICI Securities. Please go ahead.
Yeah, thanks. Probably follow up. sir, just 2 questions. First is, what would be number of store openings in Pantaloons over the last 3 years, 3-5 years?
Yeah, we'll, we'll, we'll just get back to you. You can move to the next question.
Okay. My second question is, I just wanted to know that what would be the size of innerwear segment products, if you want to share that?
No, we had shared in the previous calls. We don't give second numbers, but we have since, since I've said that, it's about INR 500 crore last year.
Okay, understood. Okay, sir. Yeah, that's it from me. Thank you very much.
Thank you. Participants who wish to ask questions, please press star and one. The next question is from Palak Shah, from ITI Alternates Fund. Please go ahead.
Ashish, thank you for taking my question. Just one, when you are indicating INR 2,800 odd crore of net debt by the end of 2024, are you including INR 1,400 odd crore to be from VIC?
Yes, I should have clarified. Yes.
Got it. Yeah, that, that's the one for me. Thank you so much, and all the best.
Thank you. A reminder once again to participants that you may press star and 1 to join the question queue. The next question is from the line of Ankit Kedia, from PhillipCapital. Please go ahead.
When are we looking at breakeven in the innerwear space and in the pure Pachwa, athleisure space?
Pachwa is a very early stage. We think FY 2027, 2026, 2027 is the likely period in which we'll break even. As far as innerwear is concerned, right now, the slowdown in the athleisure segment has extended it. We should look at either towards the end of next year or early year after that.
The losses are probably in the marketing spend and in the fixed cost, or also you are looking at a gross margin expansion from a breakeven perspective in the innerwear space?
In innerwear, there will definitely be a gross margin expansion play also possible. As I mentioned to you in response to previous question, our innerwear gross margins shrank in the previous year, primarily due to high raw material prices, and to that extent, those margins will come back as we go forward. Therefore, it will be a combination of margin expansion as well as leverage over fixed cost.
You know, in FY 2025 and early FY 2026, the size of the innerwear business, including athleisure, should be around INR 750-800 crore when the breakeven should happen? Is that a good assumption?
Yes. Yes, that's okay.
...sorry, Kashua, you know, when we had done the tie-up with Tarun, we had guided for 300 store opening in the first 3 years. Are we sticking to the guidance, or do you think the current environment where we are in, that could stretch a bit?
No, I, I am not sure we would have said 300 stores for 3 years. We had said 300 stores for 5 years.
Okay.
We opened 50 odd stores, so we'll be 100 at the end of full second year. Yes, as we go along, we are also refining the store format. We are learning from our experiences, improving product proposition, finding out missing categories and price points. We'll keep learning as we go along. Difficult for me to give a revised number, as we go along, we'll keep, letting you know how we are progressing and what's our expansion plan. This year we are talking about 40 stores.
Sure. That's helpful, sir. Thank you so much.
Thank you. Participants who wish to ask a question, please press star and one on your touchtone telephone. The next question is from Tejas Shah from Spark Capital. Please go ahead.
Hi. Thanks for the opportunity. Sorry, I logged in a bit late, so I'm not sure if this question was asked before. But just wanted to get your sense on the current demand environment that we have seen across on discretionary consumption side. Based on the data or, or cycles that you would have seen, how soon you think we can come out of this, A? B, looking at this situation that we are in today, do you think that you will go slow on on on expansion that you had guided for this year and, and would like to calibrate or recalibrate it in terms of to push it a bit of next year or perhaps later?
Tejas, two parts to the question. When do we expect the demand to recover? I think definitely not before the festival period. The extent of recovery after that will be both a function of... Because this time, as you know, festivals have also got pushed a little bit later into the year, so they're, they're about 20, 30 days later than the previous year same period. To that extent, it will look, even further than what it was otherwise. A lot of wedding dates have also got shifted towards the second half of the year, so that's another piece that actually is an important piece for our premium brands, as well as increasingly the larger ethnic portfolio.
These two, from our portfolio point of time, portfolio point of view, are the important drivers and triggers, and I don't expect them to significantly shift before the festive period. On your second question on expansion, I think I had indicated earlier that this is something that we had started to see from Q4 last year. Therefore, we had started to sort of moderate and factor in some of the situations. We had talked about Pantaloons expansion, which was last year at about 60 odd stores. 63 new stores is what we had opened last year, and we had indicated 35, 40 to 40 stores. That reflects the kind of moderation that we are doing in parts of the businesses where we think we need it.
In the parts where capital, which are not related to the capital, which are largely franchisee-led, we will continue to grow, but obviously, that will also be reflected, reflective of the demand as we go forward, because a lot of it is franchisees putting the capital and they're also cautious. We are also cautious during those periods. Overall, however, I would say that we are in a long-term growth trajectory. Our entire business over the last few years has been making investments, getting into new categories, building brands both organically and inorganically. Many of these, especially in ethnic wear, Reebok, which Vishal talked about, are in very early stages of what is possible, and we don't want to let go of that portfolio opportunity expansion that we have.
We now have a fairly full sort of plate as far as that is concerned. It needs to be fed to the extent that we get the full potential out of them. You won't see a significant seesaw. We'll continue to expand, we'll continue to invest in our business. Moderation from time to time is all that we look at.
Sure. Last question on Style Up. Is it still in experimental stage, or you believe that the proof of concept at store level is now established, and you would like to ramp it up that as well?
Yeah, I'll get Sangeeta.
Hi, hi, Tejas. Style Up, as we had mentioned before, is a new proposition in the value segment. While Pantaloons will play in the mid-market segment, Style Up is, is, fairly and squarely for the value proposition. We, as of today, have about 15, 16 stores. We have created this proposition in a completely new manner, with, you know, great merchandise at great value. A very nice retail environment, delivered through a very good retail identity, small, compact stores. We've seen initially good traction on, on these stores, but it's still early days. We've been in the market for about 7, 8 months now.
It gives us great confidence, and I think as we establish the proof of concept in the next few months, we'll certainly come back and take a look at how soon we can scale up the business.
We had, Tejas, I think 5-7 stores of this concept when we started the year, we would, at the current rate of opening, we'll get to about?
30-35 stores.
30-35 stores by the end.
By the end of the year.
It's, it's, we're feeling quite confident about how it is doing. Still, we'll have to see over a larger network on how the overall performance is.
Sure. The last one, if I may, now with the kind of diverse and deep portfolio that we have, how are we managing the human capital part? Because retail in, in, relatively, it's actually younger, industry from, from Indian, perspective. Are we kind of, creating our own, like, promoting our own talent pool, or we are actually kind of going outside our industry and then attracting talent to kind of come in, this space?
This as, you know, we have discussed in past also, a wide portfolio play requires 3 things: capital, talent, and ability to execute differential business models for different segments. We have looked at all 3, and therefore, a lot of our actions over the last 2, 3, 4 years have been built around a stronger balance sheet, raising capital in line with our vision on one side. If you look at our talent, for a long period of time, our company has been and, and the part of being part of a large group like Aditya Birla Group, we get to attract and retain the best talent in the industry. Wherever we need unique talent and specialized talent, you should see...
I mean, a part of our partnership with designers is really to harvest the experience and the talent that they bring, which is unique and very different to build ourselves. Wherever we think the talent can be built internally, we are doing it, and we're very proud of the talent that we have built over a period of time. Most of managers are leaders over the last 10, 15 years have risen from inside, and that's something that we will continue to invest in. Wherever unique capabilities are required, we are very open, and we, we go and attract the best talents required for that, and we continue to. You know, we run our businesses in a very sort of decentralized manner, which brings both unique talents and unique business models required for each of the businesses.
We'll continue to look for. It will have to be a combination of homegrown talent as well as bringing and infusing experience wherever required.
Okay. That's all from my side, and best wishes for coming quarter. Bye.
Thank you.
Thank you very much. That was the last question. Thank you very much. Ladies and gentlemen, on behalf of the management, we thank all the participants for joining us. In case of any further queries, you may please get in touch with Mr. Amit Dubey. Thank you, and you may now disconnect your lines.