Gentlemen, a very warm welcome to the Campus Activewear Limited Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Before we proceed on this call, let me remind you that the discussion may contain certain forward-looking statements that may involve known and unknown risks, uncertainties and other factors. It may be viewed in conjunction with other businesses that could cause future results, performance, or achievement to differ significantly from what is expressed or implied by such forward-looking statements. The Campus Activewear's management team is represented by Mr. Nikhil Aggarwal, Whole-time Director and CEO, Mr. Raman Chawla, CFO, and Mr.
Piyush Singh, Chief Strategy Officer. I'm now glad to hand the conference over to Mr. Nikhil Aggarwal, Whole-time Director and CEO for his opening remarks. Thank you, and over to you, sir.
Thank you, and welcome everyone for joining our quarter one FY 2023 earnings call today. I believe everyone is staying safe. We appreciate and deeply acknowledge your trust in our vision to create India's leading sports and leisure footwear brand. I'm delighted to share that our quarterly performance has been in line with our expectations, despite an uncertain and inflationary macro environment. There's been a sustained improvement in our YoY quarterly financials, exhibiting marked improvement in both top line and bottom line numbers compared to quarter one FY 2022, which was largely impacted by the second wave of COVID-19 last year. Because of seasonality seen across product mix consumption, quarter one empirically has been contributing 80%-20% of our annual net revenue.
During quarter one FY 2023, we sold more than 5.5 million pairs at an aggregate level, thereby clocking net income of INR 338 crores and a YoY growth of about 150% versus quarter one FY 2022, which was at about INR 135 crores. Both trade distribution and B2C channels have delivered a holistic growth of more than 150% apiece on a YoY basis versus quarter one FY 2022. Just to highlight, we sold the highest ever first quarter volume in the history of Campus at 5.6 million pairs, registering a YoY volumetric growth of about 141% in comparison to quarter one FY 2022.
Along with volume, our quarterly ASP has also grown by about 3% from INR 580 in quarter one, FY 2022 to INR 597 in quarter one FY 2023, despite a challenging inflationary environment. Campus Activewear's balance sheet continues to demonstrate strength with robust return ratios such as ROCE and ROE of 37.4% and 38.2% respectively as on 30th June 2022. We are sincerely thankful to our end consumers, our channel partners, and our passionate team, which has helped us in delivering this performance, which here mark the underlying strength and resilience of the brand. As always, we thank you for your invaluable support and investment. I will now hand over to our Chief Strategy Officer, Mr. Piyush Singh, for his remarks. Thank you.
Thank you, Nikhil, and greetings to everyone. Adding on to what Nikhil just said, while FY 2022 was an exciting year for all our stakeholders, we have started FY 2023 on a strong note from both an operational and a financial performance standpoint. All our distribution channels, category cohorts, and price segments have demonstrated robust growth, both in terms of volume and value, amid the challenging operating environment impacted by supply chain disruptions and inflationary trends. In latest price segments, our sell-through in quarter one FY 2023 has exhibited sustained premiumization vis-à-vis FY 2022 full year, wherein sales contribution from semi-premium and premium categories have increased from 64% in FY 2022 full year to 68% in quarter one FY 2023.
Similarly, on a category basis, revenue mix across men and women and kids have improved from 84/16 in the favor of men in FY 2022 full year basis to 81/19 in Q1 FY 2023 for men and women and kids respectively. On a trailing twelve-month basis, revenue from operations increased by almost 17% on a year-on-year basis to INR 1,397 crores in TTM Q1 FY 2023 as compared to FY 2022 full year revenue at INR 1,194 crores. Similarly, TTM Q1 FY 2023 EBITDA stood at INR 290 crores as compared to FY 2022 full year EBITDA at INR 242 crores, demonstrating almost a 19% year-on-year growth. TTM Q1 FY 2023 EBITDA margin also improved at 20.8% versus 20.4% for FY 2022 full year.
Net profit during trailing 12 months of quarter one FY 2023 stood at INR 151 crores with a PAT margin of 10.8% as against full year FY 2022 PAT of INR 124 crores at a margin of 10.4%. On the supply chain front, we continue to stay cautious of the challenging inflationary environment in the near medium term, ensuring that RM and semi-finished goods availability above everything else to maximize sales potential in the coming quarters. We continue to maintain a close watch on our input costs as well. As an outcome, while our material margin has improved from 48.4% in quarter four of FY 2022 to 49.6% in quarter one of FY 2023, our gross margin has stayed intact at 36% across both the quarters.
We are confident of maintaining our trend line growth trajectory and margin profile in the near to medium term. I will now hand over to our CFO, Mr. Raman Chawla, to take you through more details on the quarter one FY 2023 performance. Over to you, Raman.
Thanks, Piyush. Thank you so much. Good afternoon, everyone, and welcome to quarter one FY 2023 earnings call of Campus Activewear Limited. During the quarter under review, Campus as a brand demonstrated a lot of resilience. Campus delivered its best first quarter, both in terms of top line and the bottom line growth. Revenue from operations increased by 149.6% year-on-year to INR 338 crores during the quarter, with both channels available, trade distribution and D2C exhibited similar YoY growth profile in this quarter at about 150% year-on-year growth.
Our quarter one FY 2023 sales volume registered at 5.6 million pairs as against 2.3 million pairs in quarter one FY 2022, thereby generating a 141%, year-on-year volume growth, while quarter one FY 2023 aggregate ASP stood at INR 597 versus INR 580 in quarter one FY 2022, thereby resulting about 3% year-on-year ASP growth. In terms of profitability, EBITDA was at INR 62.3 crore in quarter one FY 2023, as compared to INR 16.1 crore in quarter one FY 2022. EBITDA margin stood at 18.4% in quarter one FY 2023 versus 11.9% in quarter one FY 2022.
In terms of our net profit during the quarter, it stood at INR 28.7 crore as compared to INR 2 crore in quarter one FY 2022, and our profit margin, PAT margin stood at 8.5% in this quarter versus 1.5% in quarter one FY 2022. Moving on to the balance sheet, our net debt has reduced from INR 174 crore in FY 2022 end to INR 124 crore as of 13th of June. Net debt to EBITDA ratio has improved from 0.7x in FY 2022 to 0.4x in TTM quarter FY 2023. Similarly, our return on capital employed has also gone up from 29.7% in FY 2022 to 37.4% in TTM quarter one FY 2023.
Our return on equity has also gone up from 32.9% in FY 2022 to 38.2% in TTM Q1 FY 2023. With this, I conclude and hand over to the Operator for question and answer. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to the participants, anyone who wishes to ask a question may please press star and one at this time. The first question is from the line of Vicky Punjabi from UTI Mutual Fund. Please go ahead.
Hi, sir. Thanks for taking my question. So just the first thing, actually, I wanted to understand the reasons for the seasonality in the business, because, I mean, my thinking was that, you know, given Q4 had that Omicron impact, the Q1 volumes could have been a little better than what we saw in the Q4, but we see volumes being similar. Can you help me understand what is leading to the seasonality?
Hi, Vicky. Nikhil here. No, great question, Vicky. We basically, you know, don't look at seasonality only on the basis of COVID. You know, while COVID certainly is in the past now, more or less, seasonality for us is also due to, you know, the winter season where there's festivities and, you know, when the purchase power of the consumer goes up against the other seasons, other quarters. Also because we primarily dominate in closed footwear category and our portfolio for open footwear category is very limited. Because of that also, quarter three and quarter four are basically the highest grossing quarters for us as a company. Quarter one and quarter two are lower than the other two quarters. There is a fair bit of seasonality.
While we have done a lot in the last few years to bring this parity down. I hope that answers your question.
Sure. Just one more thing. I mean, if I see the realizations for this quarter versus, say, realizations for the annual FY 2022, it seems to be a bit lower than what it was in FY 2022 and/or the average realization was in FY 2022. I think, you know, in the comments I heard that we've seen a better premiumization in this quarter versus what we saw in FY 2022. Any reasons for that?
Yeah. Hi, Vicky. Piyush Singh. Just adding on to what Nikhil just mentioned, there's a fair bit of seasonality in our first half of the financial year because during this time, during the summer months, we sell a larger proportion of open footwear, which are lower ASP products. Now, there has been a premiumization with comparison to ASP of quarter one of FY 2023 versus quarter one of FY 2022. On a year-on-year basis, there is a 3% premiumization. But that said, our FY 2022 overall numbers in terms of ASP would be a tad higher because second half of the year is not only contributing to roughly 60% of our top line, but it also is a higher ASP generating second half.
Hence, full year blended number is a tad higher, which was at INR 616 for last year, FY 2022 full year.
Okay. Sure. Thanks for that. Yeah, that's it from my side.
Thank you, Vicky.
Thank you. The next question is from the line of Jignesh Kamani from GMO. Please go ahead.
Hi. I just want to know about if you think about 1Q last year was completed because of the COVID. If you were to compare with normal, let's say, 1Q FY 2023 year CAGR, how is the revenue volume and the ASP CAGR compared to 1Q FY 2020?
Hi, Jignesh. Piyush Singh. Our first quarter FY 2020 revenue was almost equivalent to our first quarter FY 2022 revenue at INR 135 crore.
Okay.
From that perspective, it's 150% growth. Similarly, our ASPs for this quarter are way better as compared to our first quarter of FY 2020 ASP, wherein the ASP of first quarter was closer to INR 570. This time it's INR 590.
Volume CAGR?
Volume in first quarter FY 2020 we did 3 million pairs, wherein in first quarter FY 2023 we did 5.6 million pairs.
Understood. Sure. Second question is, if you take the last one year, how is the cost increase for you? You mentioned there is a 3% increase in the ASP roughly. It is commensurate to, we can say, all the cost increase or how is the scenario right now?
I'll take that. Yeah. Hi, Jignesh.
Yeah, hi.
Yes, we have taken quite a bit of cost increase already factored into the ASP increase. While there has been certain, you know, inflation in the polymers and some raw material and compounds, so far, you know, we have incorporated most of the inflationary pricing increase. Given the trend now, you know, that we are seeing in the markets, we are hoping and we are already seeing the trends to be sort of improving in terms of inflationary increases on the side of raw materials.
I mean, so just to add to it, Jignesh, if you look at our quarter-on-quarter trend, while in quarter four FY 2022, our material margin was 48.5%.
It has gone up to 49.5%, just shy of 50% in Q1 FY 2023. Despite the inflationary environment in freight logistics and some increase in contract worker wages, we were able to maintain our gross margin levels at 36% in both quarters. So far we have maintained our control over the raw material inflationary prices, while also increasing our ASP because of the product mix.
Understood. Another is on the sneaker. I think since last 1.5 years, we aggressively invested in the sneaker SKU portfolio, we think. How is the current performance of the sneaker and the market feedback? Any idea how is the contribution of sneaker as a category for us right now?
Sure, Jignesh. The contribution right now I would say is not very significant because we've just launched the sneaker range very recently. If you visit any of our showrooms, EBOs that we have across the country, about 140 of them, the sneaker range is present in our EBOs now. While we, you know, we are also in the process of launching a very good sneaker range in the other channels, namely e-commerce and MBO distribution. The contribution I would say is still at a nascent stage, but the response is very, very encouraging.
Understood. Right now, portfolio will be similar in sneaker in terms of SKU versus our other competitor, or still we need to improve on the SKU and the portfolio size?
It's a work in progress, I would say. It's not like, you know, that we don't follow, you know, a system where we just launch one range and, you know, then we're done for the year. It's a continuous process for us. You know, like I told you, already a good range has been launched in our EBO channels, and very soon you'll see a different kind of range for the other two channels as well.
Understood. My last question is on the seasonality. You mentioned that 1Q is around 18%-20% of the full year revenue. Is the seasonality there in the margin also across the various quarter?
Yes, Jignesh. In the initial quarters, there is a fair bit of fixed cost absorption that happens. As we progress down the financial year, our operating leverage keeps on improving from here on. We see two levels of improvement, one at the material margin, gross margin level because of the enhanced product mix and a high ASP, and a relatively high share of high ASP product being sold. The second is on account of operating leverage, with a better absorption of fixed costs in quarter three and quarter four.
Understood. Sure. Thanks a lot and all the best.
Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Ankit Kedia from Phillip Capital. Please go ahead.
A couple of questions from my side. While you have shared the growth across the channels, could we get the revenue split across, you know, the channels?
Yeah, sure, Ankit. So our trade distribution channel out of INR 338 crores has done almost close to INR 200 crores, INR 199 crores to be precise, and the remaining comes from our B2C channel, which is the balance. It's INR 113 crores from e-commerce and another INR 21 crores from our EBO plus key accounts.
On seasonality perspective, you know, do you see seasonality across channels or a particular channel, like the trade channel has more seasonality while, you know, online should not be so seasonal in nature, given that, you know, you know customers would tend to buy, you know, throughout the year on online channel?
It's not about customers buying across all the channels; it's about what kind of product are the customers buying. Seasonality is holistic across all the channels. For example, we see lower ASPs across all the channels, relatively slightly lower ASPs, because if the aggregate is INR 597 vis-a-vis INR 616 for full year FY 2022, we see a slight drop of say 1%, you can say 2%-3% in terms of ASP across trade distribution e-commerce because irrespective of the customer journey, the customer ends up buying relatively higher share of slip-on, sliders and sandals in the first quarter and the second quarter when in the entire North, East and Western India belt there is a high degree of summer season and high temperature ranges.
As winter months comes in with festivities and more marriages and colder season coming, people tend to switch to closed footwear which has a higher ASP. Seasonality is holistic across all channels. Just to answer your question.
Just to add, Ankit, there is also an element of school shoes which are also lower in ASP compared to regular footwear. That's also mostly sold during quarter one, during this time, which also brings down the ASP slightly.
Sure. How big would be your school portfolio now?
It's catching up after 2.5 years. Earlier, it used to be roughly 8%-10% of our portfolio. Now it's again catching up and very soon we'll be in the same trend line.
The kids portfolio is broadly school shoes portfolio? Should we understand that way?
See, the kids portfolio for us so far over the last two years was ex-school shoes, and it's roughly 10% as of now.
Sure. My second question is regarding your working capital. You know, from FY 2022 to Q1, we have seen a significant decline. Can you just throw some light on the inventory and receivable days?
Yeah, sure. Ankit, while our receivable days, you'll be happy to know that our receivable days have improved from 40 days of sales outstanding to 35 days of sales outstanding. We are still maintaining the same level of inventory cover at almost 108 days outstanding for the reason that end of quarter one is just the precursor of the beginning of our festive season because as you enter into July and August and September, a lot of offtake starts across online and our trade distribution channel. At this point in time we tend to maintain the highest level of inventory cover just in order just from a season preparedness perspective. Despite that, our inventory cover in terms of days sales outstanding stays the same.
While we have managed to work on our payable days and stretch it, to a certain extent, and hence you see a significant improvement in our, net working capital.
That's helpful. Thank you so much, and all the best for the upcoming quarters.
Thank you, Ankit.
Thank you. The next question is from the line of Manish Poddar from Motilal Oswal Asset Management. Please go ahead.
Yeah, hi. Hi, thanks for another call. Primarily three questions. First is, you know, like you mentioned the three-year volume CAGR across for the business. Can you help me with that for men, women and kids?
Sorry, Manish, your voice is a little garbled. Can you please repeat the question?
Sure. I'm just trying to understand three-year volume CAGR for men, women's and kids for this quarter. You know, what would that number be?
Volume CAGR.
While we can take that question offline, but I can give you a breakdown. Last year for full year FY 2022, our distribution between men and women and kids portfolio was 84% towards men and 16% towards women and kids, wherein it was equally spread between 8% apiece across women and kids. It has improved to almost 80/20 now, whereas 80% is towards men and 10% is for women and remaining 10% is for kids and child. The year before that, FY 2021, if you wanna look at, the ratio was again very close to it. It was almost 88/12, wherein 88% was men and remaining 6% apiece was
Women and kids.
Kids and child and women. Yeah.
Okay. Would you be able to help me with, you know, how much was the ad spend during this quarter and the last quarter, Q4, FY 2022? Absolute amount.
Yeah. This quarter.
We have managed.
We spent about INR 17-odd crores in marketing, which is roughly 5.2%. Last quarter we did almost INR 9 crore. For us ad spends on a trend line basis are expected to stay between 6%-6.5% of our top line. But there is some bit of lumpiness depending on what kind of product portfolio are you marketing and what kind of regions are you targeting, plus the channels you are targeting. Quarter one for us typically contributes roughly 5%-5.5% of our ad spends. Quarter two and quarter three tends to be heavy because they are the start of the season and the middle of the season. Quarter one typically
Year to fourth.
Quarter four is typically the lowest quarter in terms of ad spends for us.
So-
For quarter four FY 2022 it was 2.5%. quarter one FY 2023 is 5%.
Effectively the delta change in other expenses is largely because of the ad spends.
Yes, yes, because of the ad spend and some bit of employee appraisal that changes from quarter four FY 2022 to quarter one FY 2023.
Yeah, annualization.
The annualization of it, because it will spread over the full year now.
Got it. Just one last thing. Just one last one if I can.
Manish, I'm sorry to interrupt. May we request you to come back in queue for follow-up questions. Participants are requested to limit their questions to two per participant, and time permitting, you may come back in the queue for a follow-up. The next question is from the line of Akshay Kothari from Envision Capital. Please go ahead.
Yeah, thanks for the opportunity. Sir, in the last call you mentioned that we were focusing on the aspect of aspiration, accessibility, affordability. I had a question regarding aspiration. My question is specific, like which major leagues are we looking to sponsor, for example, IPL, Pro Kabaddi or Commonwealth? Who would be our brand ambassador? Do we have any brand ambassador? In terms of adjacencies, are we planning to go into the sports specific like football studs, cricket spikes or badminton shoes? Any of those? Yeah, that's my question.
Hi, Akshay. Nikhil here. Let me answer your second question first. We are not looking at any performance shoes category right now, like cricket or badminton and all, because it's a fairly, you know, very niche market in India, very concentrated. We do more of everyday wear shoes, you know, which our audience, our consumers can wear, you know, throughout the day for all purposes, whatsoever they need. With regards to, you know, any of the aspiration components that you spoke about, we basically, you know, we follow a very stringent, firstly, an ROI-based marketing model. We absolutely make sure that wherever we do spend in the marketing, there has to be, you know, significant ROIs indicated from that.
Given the kind of, you know, the relatability and, you know, that these platforms have today, it's not exactly very, you know, ROI generating for us, the marketing in these, you know, let me say the IPL.
The leagues and the
The separate leagues. Yeah. That is one of the main reasons why we shy away a little bit from marketing over there. Given, you know, if we're not totally closed off to it. If the right opportunity presents at the right time, we could be open to looking at that as well in future.
We are a fashion-forward organization, and the kind of portfolio that we offer is bringing you the latest fashion trends globally for the first time in India at the fastest time possible. From that standpoint, we have pivoted our marketing spend more towards digital, influencer, net community and all, where the relatability quotient is relatively higher. We are always on the lookout for the right kind of celebrity and endorsement, be it sports leagues that you talked about, be it kind of impact properties across OTT and TV channels or be it any celebrity. As Nikhil rightly mentioned, it has to justify the bottom line and the ROI that we are expecting out of it. All the decisions are driven by the profitability metrics.
Okay. Yeah. Thanks a lot and all the best.
Thank you.
Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity. A couple of questions. First is, you know, on the margin profile, you did indicate that, you know, as the quarter goes by, you know, you have heavy quarters, Q3, Q2, which are higher, you know, operating leverage and higher margin, you know, accretive quarters. Just if you could, you know, also help us understand, you know, from a two-year point of view, the kind of growth, one, we are seeing, and second is the kind of ASP mix improvement we are seeing. What is the kind of, you know, margin improvement one should, you know, think of, how we should think of the margin improvement?
Hi, Ali. Ali, unfortunately, we cannot give you any forward-looking statements. What we can tell you is that historically we've performed at a good 8%-9% ASP growth minimum and about, I would say, 22%-23% volume growth for the last ten years, almost eight years - 10 years. There is no reason, you know, we should be looking at performing lesser than that. That's been the historical trend for the company. Even in terms of margins, we have seen a good 1%-1.5% growth in both the gross margins and flowing down to the EBITDA and PAT margins for the last at least three years. Right?
There has been significant margin improvement and we, you know, we are working on many initiatives right now, very fruitful initiatives which should lead to higher gross margins as well.
Got it. This is very helpful. I mean, I was coming more from the point of view that if I see last three to four years, EBITDA margins, in fact, and of course even gross margin has gone up by nearly 400 basis points-500 basis points. You know, I mean you still see room for improvement even from this level with the kind of revenue growth that you indicated.
I mean, yes, obviously because operating leverage would keep on kicking in with the in-house space. Even if we maintain the same revenue growth trajectory, that is bound to show its impact on the operating leverage side.
Got it. This is very helpful. Second quick question is on the, you know, economics of the business in online versus offline. Is online equally margin accretive? If you could just, you know, explain, you know, the margin profile between both on gross and EBITDA levels.
Sure, Ali. I mean, while we have explained this historically on an FY 2022 full year basis, I won't comment this on a quarter-on-quarter basis, but from a full year trendline perspective, our B2C online channel has contributed at a higher EBITDA margin levels compared to our trade distribution level. There is a delta of 300 basis points-400 basis points in terms of margin vis-à-vis trade distribution versus our B2C online platforms. With B2C online contributing a higher margin.
Understood.
In fact, the reason historically for shift in our margin profile is largely because our B2C online business has grown to almost 35% revenue contribution.
That's both at gross and EBITDA level.
Yes, absolutely.
Got it. This is very helpful. Thank you.
Thank you.
Thank-
The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.
Afternoon, everyone. Thanks for the opportunity. I've got three questions. The first one is, can you talk a little bit about, you know, the growth trend that you're seeing on e-commerce platforms? This is marketplaces, not the B2B distributors, right? Purely on the likes of Amazon and Myntra, Nykaa. Are you still seeing, month-on-month growth, even after opening up, month-on-month volume growth on those platforms? How has your market share trended, in the recent past, on e-commerce platforms as well as overall, wherever you are able to track? That was question number one.
Shall I take this one by one?
Yes, please.
Hi, Jay. Piyush this side. See from a D2C online perspective, yes, we are still witnessing decent month-on-month growth on the marketplace side. Any which ways our B2B business is very small. It's only 10% of our overall D2C online portfolio. For example, compared to quarter one FY 2022, our online business in quarter one FY 2023 has grown by 130% again with significant improvement over quarter four FY 2022 as well. Just to answer your question, yes, we are seeing a fair bit of both volume and value growth across these marketplace businesses. Yes. I mean, we can go on to your next question.
In fact, our commission levels, just to add to it, our commission levels on an aggregate basis for FY 2022 has reduced by 1 percentage point in quarter one FY 2023. It has also led to some bit of margin improvement as well in this quarter.
Okay. Correct. Market shares on these platforms, do you get some industry growth? Are you able to compute your market share or your-
I mean, very, very difficult to comment on that. I mean, you'll be a better judge of what the market is growing at. The number that we see and triangulate from the market is the channel is growing at anywhere between 25%-30% on a year-on-year basis. If we take that number as a baseline, our performance so far has been better as compared to the market. On a derived basis, yes, we tend to gain market share on these platforms, but very, very difficult to triangulate.
Sure. My second question is, are South and West market growing faster for you? Can you give some color in terms of how growth is trending South and West versus maybe North and East?
Yeah, Jay. Hi. South and West have particularly done quite well even for quarter one, where about, you know, 19% of the sales of the overall MBO distribution sale I'm talking about has come in from West and about 6% is coming from South. There has been an emphasis and a very clear focus on growing these specific two markets. You know, we are very happy to tell you that both of the markets have done remarkably well for this quarter.
I mean, for FY 2022 full year, South and West put together were contributing close to 21%-22%, which has now improved to 23%.
23%. Correct.
That's helpful. Thank you. The final question is on, you know, your thoughts or your views on Relaxo doubling down the capacity on Sparx, so competitive intensity and.
Jay, we don't comment on any of our competitor policies. I'm sure everybody has a strategy that they follow.
Sure. Can you call out the operating cash flow for the quarter?
Yes, our OCF for the quarter is at about INR 83 crores.
This has. Yeah.
Our operating cash flow is about INR 83 crores of generation that we have done this quarter, compared to our EBITDA number of about INR 62 crores.
Perfect. Thank you so much, and good luck for the rest of the year.
Yeah. Thank you.
Thank you, Jay.
Thank you. A reminder to the participants, anyone who wishes to ask a question may please press star and one at this time. The next question is from the line of Ashwin Agarwal from Akash Ganga Investments. Please go ahead.
Yeah, thank you for the opportunity. I just had one question. Like, could you give me a split, like the revenue split between the Tier 1 cities and Tier 2 cities, like, you know, NCR region, you're dominating there and Mumbai, Bangalore and other Tier 2 cities. Do we have a split over there?
Yes. Hi, Ashwin. We do have Piyush this side. We do have a split here. On an aggregate basis, 70% of our revenue comes in from Tier 2, Tier 3 cities, and 30% of our revenue comes in from Tier 1 and metros. While on a channel basis, trade distribution remains the same mix, but our D2C online business has a roughly 45-55 kind of a mix in favor of Tier 2, Tier 3 cities.
Do we have any, like, major strategies to penetrate into the Tier 1s? 'Cause we can have a good market share over there as well, looking at the opportunities like big cities like Mumbai, Bangalore, Kolkata.
Certainly. You know, the way we are looking at premiumizing our portfolio, and we have significantly premiumized over the last three years, this is one of the major reasons we've been able to garner extra market share in the metros and Tier 1. Also, you know, we have had a specific emphasis on opening our EBOs in these cities, which has led to a very high aspiration quotient and a premiumization as well in these cities. Given with, you know, both the factors, we've been able to gain disproportionate, I would say, market share in these metros and Tier 1s.
Okay. Thank you.
Thanks.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Sahil from IBT. Please go ahead. Sahil, your line is unmuted. Please go ahead with your questions. As there is no response, we would like to remind participants that you may press star and one to ask a question. Next question is from the line of Nitin from CLSA. Please go ahead.
Hello. Thanks a lot for giving the opportunity. My question is with respect to gross margin contraction of 570 bps. Would you be able to help me separate the in terms of the quantum of gross margin impact? I guess, like, GST rate changes led to 100 bps impact. How much was the impact due to the product mix, like, in terms of what is the share of open footwear and how it expanded YoY, if you can throw some light on that.
Hi, Nitin. Piyush this side. Not sure why we are saying that there's a gross margin compression, because compared to Q4 FY 2022, our gross margin has stayed intact at 36% in Q1 FY 2023. Even from a full year FY 2022 perspective, our gross margin in FY 2022 year-end for a full year basis was 37.5% vis-a-vis 36% in Q1, while our major quarters are yet to come in. If you can-
No, I'm just.
First, understand the 570.
No, just comparing quarter-on-quarter like a YoY from Q1- to- Q1.
Okay. Nitin, that would be an unfair comparison because last year for quarter one, the majority of the revenue came in from our D2C online channel, which by nature itself is a high margin generating channel. Because last year, for all the three months of first quarter, distribution got impacted severely by the second wave of COVID-19.
Okay. Got it. In terms of, like, the raw material situation currently, like what is the inventory position we have built up and how we are confident about maintaining the margin from the inflationary pressure? If you can quantify on the quantum of inflation we have seen in this quarter.
I mean, while it will be difficult to quantify the quantum of inflation that we have seen, all we can say is, despite all the inflationary pressures, we have managed to improve our YoY ASP by 3%. Even on an aggregate level, while we closed FY 2022 at an ASP of INR 616, we have managed to achieve an ASP of INR 597 in the first quarter itself. Now in order to talk about our preparedness, we have taken certain, as we had mentioned in our last quarter call itself, we have taken some proactive steps in terms of building up essential raw material supplies like, forward purchase of, EVA raw material. That has really paid off, from an availability perspective, and hence we were able to
Place the product at a faster pace in the market. From a GTM perspective of first to market and fastest to market has really helped us in gaining some bit of revenue growth in the first quarter itself. From a preparedness perspective, all I can say here is that we have the requisite inventory levels to take care of our festive season in the coming quarters.
Okay. Lastly, like, in terms of the difficulty in sourcing EVA. How exactly we have entered into contract? Look, I'm just thinking from that perspective, the competition is unable to source this raw material. Will it be an opportunity for us to gain share?
Surely. EVA is just one of the components, you know, among the many raw materials that we purchase. While the EVA is certainly extremely important because, I mean, you cannot make a sole without it. In our case, we have, you know, booked EVA for the next six months for this quarter. We obviously pay only as it arrives. It's not a payment impact on the cash outflow, but it's more of securing the supplies at a specific price. You know, there is no volatility in terms of price and supply, which has really helped us in terms of optimizing our supply chain and making sure that we are the fastest to the market.
Among other raw materials as well, we are trying to follow a similar approach. We're not forward-booking, but as we are one of the largest consumers in our footwear segment for most of these raw materials, we have a very strong negotiating power, you know, with the vendors, and that's how we sort of go about purchasing them.
Okay. Thanks a lot. All the very best. Thank you.
Thanks.
Thank you. A reminder to the participants, anyone who wishes to ask a question may please press star and one at this time.
Next question is from the line of Soni Yogesh from InCred. Please go ahead.
Hi. Thanks for taking my question. Sir, as channel mix has evolved considerably over the past four years, five Years, the D2C now is 35% of our overall sales. How do you see the channel mix evolve going ahead, let's say,four years five years from now?
Hi. You know, yes, certainly, you know, it's done very well for us as a brand, as a company. The D2C channel has grown significantly. Today the mix is about 60/40. You know, going forward, we in a stable state situation, we see it stabilizing at somewhere around 50/50 over the next couple of years. That's, yeah, that's how we are planning the two channels.
Okay. Sir, within that, if we look at trade distribution, as you just mentioned that, you know, close to 80% of our sales from trade comes from our core markets of North and East. How do we look at growth there? Because I mean, the kind of penetration and the market share would be high in those markets, right? How do we look at growth in those core markets in trade distribution?
Interesting question. You know, there is still, and we debate this a lot internally as well. There is a lot of potential still in our core markets left. It's not like, you know, we have saturated the markets in any way or, there are still so many areas which are sort of untapped, which have untapped potential. We are always on the lookout to creating and growing our distribution channels, you know, with the wider reach, with more number of distributors and retailers on hand. There's a lot of potential still left, and we're nowhere even close to saturating in these core markets.
Basically, you are saying that there is still an opportunity for higher penetration as well as improving the throughput from a particular outlet in those core markets. If I got it correctly.
Absolutely. There's a lot of potential in increasing the market share and the wallet share in each of these outlets that we have.
Okay.
in the MBOs as well.
Okay. Sir, when we think of wallet shares, I mean, in the MBOs, in the core markets, I mean, increasing it marginally from the current level, competing with the other categories as well in which we are not present, like, let's say men's formal wear or, I mean, maybe casual wear.
Yeah. There are two things happening there. One is that we are gaining market share on account of other sports shoe brands, where the consumer is preferring Campus over other brands. The second is the second factor that's contributing is on account of the consumer preference shift towards casual and sports shoes. There's a significant shift that has happened in the last couple of years, and it's progressively happening much more and more after COVID happened. You know, like leather industry, for example, is on a downward trend right now. It's not growing at all. It's actually on a degrowth path. All of that market share is sort of converting to casual and sports segment.
Okay. Basically the product mix at an MBO level itself is changing, which is benefiting us, right?
Yes. Yes. One of the factors that's contributing to our growth. Yes.
Okay. Thank you so much, and all the very best, sir. Thank you.
Thank you.
Yeah. Hi, Operator. Just for everyone's clarification, I would like to highlight a statement here. Maybe because of the statement that we have published in the newspapers, people are looking at gross margin for the quarter as INR 338 crores minus INR 170 crores, equaling to INR 168 crores. In our parlance, we mention this as material margin. Material margin for this quarter of first quarter of FY 2023 is 49.6%, which last year same quarter was 55.3% because of the disproportionately high revenue contribution coming in from e-commerce channel. Trade distribution for us was literally shut during the first three months because of the second wave of COVID-19. If you look at the full year FY 2022 audited numbers, this material margin was close to 50%.
Both on a full year basis as well as quarter four FY 2022 basis, we have kind of maintained our material margin. While we have a better view of our direct expenses and hence our gross margin for both these quarters, quarter four FY 2022 and quarter one FY 2023, have stayed intact at 36%. I wanted to clarify this for everyone's benefit, because the breakup is not given in our published financials.
Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. One observation across, you know, the footwear industry is that, you know, while the value segment has, you know, continued to struggle, at least the premium and the mid-premium continues to do well. Just wanted to know your thoughts on this and how are you seeing this trend to continue or maybe change going ahead?
Sure, Gaurav. See the value segment, which is basically up to INR 999 MRP, is extremely saturated as a market. If you notice that most of the private labels, and there must be like hundreds of them in India, they're all manufacturing and selling shoes between this price point, from INR 500 to INR 999. And that's where, you know, the saturation sort of creeps in. It's extremely competitive at that space also, which leads to very low margins for everybody operating in that value segment. That's where, you know, we as a brand differentiate ourselves by because of the aspiration, brand aspiration we've created over the last several years.
We dominate and do really well in this semi-premium to premium segment, which is INR 1,000-INR 3,000. Specifically, INR 1,000-INR 2,000 is our core, you know, where there is absolutely no competition that way. Which leads to higher ASP and higher realizations also in the margins, in the gross margins.
Yeah. Gaurav, just to add to it, the revenue contribution from semi-premium, premium category has significantly gone up on a year-on-year basis. Last year, same quarter, anything above INR 1,000 rupee MRP contributed only 53% of our revenue, which in this quarter of FY 2023 has gone up to 65%. Even for FY, or rather 68%. Even for full year FY 2022, the contribution from semi-premium, premium for us was 64%.
With enhanced marketing, focus targeting and imagery building and premiumization of portfolio, we've been able to significantly increase our ASPs and contribution from the premium and semi-premium categories.
Sure, sir. Got it. Sir, my other question or rather clarification is, you know, when you say your ASP is, you know, INR 600-odd, so that would be the net that you realize, right? The, it's nothing to do with the selling price, I mean.
That is the exact realization in our books. That is the Ind AS realization for us.
Okay. Sure. I've got it. Thanks for coming.
Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
I'm sorry, I just asked the question.
The next question is from Tejas Shah from Spark Capital. Please go ahead.
Hi. Hi, all. Thanks for the opportunity. Just couple of questions from my side. The first question pertains to that in other retailers we have seen the seasonality in margins is also emanates from the fact that they have a very wide duration of end of season sale and full price sale, which actually spreads over different quarters. Just wanted to understand how it plays out in our portfolio, especially in the Q1.
Hi, Tejas. Piyush this side. The way our business is constructed is very different compared to a pure play retailer. See, 60% of our sales happen through paid distribution network, where the level of discounting is sub 2% for us. It's almost a full price sales for us, and hence our ASPs are lower as compared to the couple of retailers that are listed in the space. Similarly, in our e-commerce portfolio, which is 35% of our top line, our discount percentage so far has stayed sub 20%, despite it being touted as a discount channel. Lastly, for our EBO and key account channel, our aggregate discounts have stayed below 6% for the channel so far in the first quarter.
That takes impact of everything, including EOSS and any discount that is happening at the store. This part of the portfolio is only 5% of our top line. Just to give some more color on a channel perspective, trade distribution, which is 60%, the average discounting that we typically see at a multi-brand outlet for our brand is anywhere between 15%-20%. For the large part of portfolio, which is roughly 95% of the portfolio, aggregate discounting somewhere between 15%-20% on an annual basis.
Okay. There is no seasonality there, which would have impacted us disproportionately in this quarter.
Seasonality is there in terms of the product profile that we end up selling. Like in the first two quarters, there is a fair bit of open footwear, which is as high as 25%. But in the second half of the year, this percentage goes down to almost 10% and remaining 90% is closed footwear, which is a higher ASP product for us.
Sure. That you mentioned before. Second question is on the kind of expansion that we have done, both geographic, product portfolio, and then the channel mix change. Just wanted to understand in the last two years, pre-COVID same quarter, what was the number of SKUs we are catering with and what will be the number of SKUs that we are catering today with?
I mean, number of SKUs remain more or less the same. It's largely the channel mix that has changed.
Yeah.
There must be like very, very small variation in that sense because last four, five years we've been having a very good assortment of SKUs. It's not exactly a function of how many designs. It's more about what's the volume per design, you know, that we can sell. That's where the throughput has really kicked in for us over the last couple of years.
Sure. Consumer taste for our brand across channels or across geographies does not change much. The SKU pressure does not increase with more markets or more geographies to cover.
Sorry, come again.
No. Yeah. Sorry. So usually we have seen when we enter a new market, there's a new taste preference or fashion sense that we have to cater to usually. Then that initially it actually builds some SKU pressure. We are, as what I understood from your statement, you are saying that in our category, perhaps in our brand, that pressure is not that high.
Yeah. It is not that high because, see, you're right in that sense because as we entered into frontier markets like South India markets, we had to beef up our open footwear and slip-on and slider portfolio. Similarly, when we entered West, we had to add a significant bit of sandals as a portfolio. If you look at the overall picture, that incremental addition is not even 10% of our overall portfolio.
Okay.
Given the strength of our R&D department, we have one of the largest R&D teams, development teams in India in this category. Even creating products from that perspective is not exactly any bit of a challenge. It's more about, you know, creating the right product for the right market where we are really experts in.
Sure. Understood. Thanks and all the best.
Thank you very much. That was the last question for today's Campus Activewear Q1 FY 2023 conference call. On behalf of Campus Activewear Limited, that concludes this conference. Thank you for joining us. In case of any further queries, please reach out to Campus Activewear's investor relations team at investors@campusshoes.com. You may now disconnect your lines. Thank you.
Thank you everyone for joining the call. It was a pleasure talking to you all. Thank you.