Ladies and gentlemen, good day, welcome to Vedant Fashions Q1 FY 2024 Earnings Conference Call, hosted by Axis Capital Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from Axis Capital Limited. Thank you, over to you, sir.
Thank you, Seema. Hello, everyone. At Axis Capital, it is our pleasure to welcome you all to Vedant Fashions Q1 FY 2024 Earnings Conference Call. From the management, we have with us Mr. Vedant Modi, Chief Marketing Officer, and Mr. Rahul Murarka, Chief Financial Officer. Thank you, and over to you, Vedant.
Thank you, Gaurav. Good afternoon, and a warm welcome to all the participants. I am Vedant Modi, the Chief Marketing Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited Q1 Financial Year 2024 results. I hope everyone got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchange, as well as the company's website. In this quarter, we continued to increase our retail footprint, which is the dominant channel for our company. As of June 2023, Vedant Fashions EBO area stands at 1.56 million sq ft, spanning 662 stores in 260 cities and towns globally. The national EBO footprint tally is at 646 stores, spread across 248 cities and towns.
In this quarter, we opened net square feet area of around 85,000 sq ft across 13 exclusive brand outlets in India. We have also opened company's largest flagship store of around 22,000 sq ft in the Bangalore city. We have a strong and healthy pipeline for new rollouts planned for the remaining part of the financial year. We feel proud to share that we have launched Twamev. Twamev empowers individuals to express their true selves through captivating attires and the philosophy of being uniquely you. We have opened three Twamev exclusive outlets in this quarter as well, aggregating to 22,000 sq ft area cumulatively. These Twamev EBOs have opened across three cities as per our strategic market expansion plan.
We have brought in French consultants to design the experience in these stores to provide an atmosphere of elegance and individuality, while considering consumers' psychographics of the target group. We have also launched women's wear in Twamev. The product mix and operations for Twamev have been built on the tried-and-tested algorithmic data sets of Manyavar and Mohey, utilizing the two decades of data we've been able to collect. We are seeing great response from the customers, which furthers our confidence in the strategy that was planned for Twamev. Vedant Fashions is India's largest wedding and celebration wear company in the branded Indian wedding and celebration wear market. It is pertinent to note that we are predominantly a wedding-focused business. In a given period, wedding dates can shift over months or quarters based on astronomy.
In this particular quarter also, as expected, we witnessed significantly lower wedding dates compared to the same quarter in last year, which got reflected in our performance as well. Since last year, Q1 , rather, H1, being the first clean normal period after COVID, had a very strong surpassing effect as well, coupled with promising wedding dates as well, which resulted to a very good H1 of last year, doing around 42% of full year business, which is typically a lot higher than any other normal year. We expect this to normalize in the current financial year. Majority of the sales will be driven by a strong H2 period.
In this quarter, we have strongly focused on further enhancing our business dynamics in line with providing better consumer experience through our renewed digital interface website, larger-than-life super flagship store launches, brand launch of Twamev, and further expanding the retail footprint in existing dense and new markets strategically. We have also focused on category-specific marketing for our kids category and for our women's wear brand, Mohey, by partnering with marquee events like Femina Miss India and a lot of influencers as well. These efforts, coupled with the strong moats, which we have established over a period of time, have continuously led us to maintain industry-leading margins and return metrics. We have reported pat margins of 29.5% in the Q1 of financial year 2024 as well.
We are very positive with the business outlook and are optimistic and fully prepared for this financial year as a whole, with wedding and festive seasons ahead in this year. With this, I will now hand it over to Mr. Rahul Murarka, to take you through the financial performance of our company. Thank you.
Thank you, Vedant. Namaskar, and good afternoon, everyone. I would like to highlight the key financial metrics for Q1 of FY 2024, based upon the consolidated financial statements. During Q1 FY 2024, the company reported revenue from operation of around INR 312 crore, and sale of our customer is around INR 422 crore. The revenue and related metrics during the quarter got impacted due to significantly lower wedding dates compared to Q1 of FY 2023. Moreover, Q1 FY 2023 was the first full clean period after COVID, coupled with full credit wedding season. Hence, the base period of Q1 FY 2023 was not a normal period to compare performance with Q1 of FY 2024.
...On comparing our performance with Q1 of FY 20, which was a normal quarter coupled with high wedding dates, our revenue from operation grew by approx 52%. The company continues to report industry-leading gross margin of around 66.8% during Q1 of FY 24. The EBITDA margins are around 47.7%. The EBITDA stood at around INR 149 crore during Q1 of FY 24. The company reported strong PAT margin of 29.5% during Q1 FY 24. The profit after tax stood at around INR 92 crore. Moreover, the PAT generated during that trailing 12-month period of June 23 is approx 135% of debt working capital employed. Further, the company also witnessed growth in PAT by approx 65% in Q1 of FY 24 over Q1 of FY 20, based upon internal management MIS.
The company continued to generate significant cash, driven by a healthy cash conversion ratio. During Q1 of FY 2024, the company reported cash conversion ratio of approx 78%, which has been computed based upon the operating cash flow over PAT. We have been also able to achieve industry-leading ROFE of 91% during trailing 12 months period, ended June 2023. We have continued to maintain efficient working capital days of around 85 days, based upon QTM June 2023 period, which is computed based upon internal management MI format. It would be more relevant to review our business performance metrics at an annual level, since performance in a particular quarter may vary based upon spread of wedding dates across the year.
We are hopeful and positive for H2 and full year as a whole, owing to wedding and festive seasons in H2 during this financial year. Thank you, and namaskar, everyone. We can now move to the Q&A session.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Mr. Tejash Shah from Spark Capital. Please go ahead, sir.
Hi. Hi, Vedant. Hi, all. Thanks for the opportunity. A couple of questions from my side. Vedant, in your opening remarks, you spoke about the two- decade of data that we have. I was just curious to know that in past, in the years where we have this Adhik Maas, in Hindu calendar, how does the demand play out in the balance part of the year? Do we see a very unusual pent-up demand for the balance part of the year, or it's a kind of business which gets lost and it kind of devolves into the next year wedding season?
Absolutely. Thank you for that question, Tejash. I guess the last time this happened was Q1 of FY17. In FY17, what we saw that again, May, June had a bad wedding period, and there were low wedding dates, and we saw a double-digit degrowth in Q1. However, we ended the year quite strong, with almost 16%, 17% approximate, of revenue growth in that particular financial year as well. There was a double-digit degrowth, but ending the year with a positive note. Yes, there was a spillover effect in H2 of that particular financial year, and almost 65% of the business, 66% approximately of the business was done in H2 compared to H1 in that particular financial year.
Okay. Okay, that's very helpful. Second and last question, you spoke about Twamev. Just wanted to understand a bit of KYC on Twamev's clientele, usually, which income group or which strata, they come from, and how do they discover the brand and how you discover them as customer? Because route to market won't be the usual one. How does the branding and designing philosophy changes versus the rest of the portfolio over here? That's the last question from me.
Absolutely. Thank you for that. In terms of Twamev, in terms of our clienteling, from a marketing perspective, Manyavar's PG stands at about INR 5 lakhs-INR 50 lakhs, whereas we see that the Twamev target audience would have a annual income of about INR 50 lakhs, upwards of INR 3 crores-INR 4 crores. That is the kind of Twamev target audience we want to cater to. In terms of reaching out to the consumers, for the starters, the stores that we are opening in itself are the most amazing stores that we've ever opened. If any one of you have time, I mean, I really think you must visit our store in SouthEx Delhi, which has very recently opened, and that store shines in the best wedding market of India.
These stores in itself are the best form of marketing, in my view. On the other hand, we've also hired the best of the creative agencies, and we are going to be out with the brand film as well very soon. We will have a digital slash offline presence for the brand, where we will target the higher income strata of each of these cities in order to get them to visit the store.
If you visit Twame social media as well, you will find that we had an amazing launch event for our Bangalore store, which was the first one we did. We were able to bring in almost 100 plus high-net-worth individuals, who all came in and circles typically for a HNI group in a city are small. Even bringing in 100 of them can do a lot of noise, and we've seen that, sort of store opening, having great results on the kind of store sales we're now able to achieve in Bangalore itself. From a design philosophy point of view, I think, we continue to follow the methodology of a bottoms-up approach. The consumers' demands in Twame were slightly different, but we continue to learn from the consumers, develop those designs in-house, and then serve them to our stores.
That's a very similar strategy of a bottoms-up approach designing, which is something we will continue with.
Sure. Just one associated question. This clientele requires a very comes with a very different service aspirations, and luxury as a theme is relatively new to India. Where do you go to hire the talent for this kind of engagement, and, or are you planning to kind of develop that organic team within the talent pool that we have already?
Absolutely. Great question. Given the fact that, you know, this talent is very scarce, what we are looking for is individuals who have great communication skills, and then what we are able to do is teach them how to the art of selling Indian wear, and teach them the art of service. We are actually scouting for people from across places like hospitality, et cetera. You know, I must say that the best way to explain this is if you visit the store itself, you will find that Manyavar has always been a one-on-one experience, where you have one fashion advisor catering to one client. However, in Twamev, it's a two-on-one experience.
What we are trying to do is, you have 1 fashion stylist, along with a fashion advisor to help you with your purchase decision, and the whole idea is to only inspire you, and selling is an outcome of inspiring you. At the same time, from a hospitality perspective, we've worked a lot in terms of the kind of service levels we want to have at the store. We've brought in hospitality experts to be available at the store. We have a very good refreshment menu, et cetera, which has also been worked upon. I think the best way would be to show it to you practically, and if you ever get any chance, please do visit any of the stores that have already opened up.
Sure, I'll do. That's all from my side. Thanks. All the best.
Thank you, sir. The next question is from the line of Mr. Sameer Gupta from India Infoline. Please go ahead.
Hi, sir, and thanks for taking my question. Firstly, I have two. Firstly, on this, 22% in-store sales decline, just wondering if, is there a wide divergence where you can, you know, in stores where there is some organized competition firm that has come up in recent times, versus stores where there is no such organized competition in the vicinity? Can you give some color on that aspect, will be helpful.
Absolutely. Thank you for that question. You know, we monitor organized competition extremely closely and, you know, from the perspective of anywhere there is organized retail that has opened next to our store, the impact is not at all different from the other stores that are in our fleet. This slowness was seen overall across the industry, across the fleet of stores. I think one very interesting, you know, piece of data here, is that traditional markets are typically the most impacted in a weak wedding date quarter. These are markets like Bihar, Orissa, Andhra Pradesh. In these markets, actually, none of the organized retails have even entered. Maybe there's one or two stores, but primarily they have not even entered these markets, which were the highest impacted markets for us for this quarter.
That's very helpful, sir. Secondly, on this pickup in H2 and the hope, is this more of a statement of hope at this point, because discretionary consumption across the board is struggling, and apart from wedding dates, is there any other triggers that you are hopeful for? Are we still good with our mid to high single-digit SSS growth guidance for the full year?
Sure. Thank you for that question. You know, in terms of saying that this is a hope, I mean, definitely we are hoping for the best, but at the same time, you know, this is a trend we've seen in multiple years across the past. Our business is more focused on wedding dates, because wedding is one event where this is not a purchase decision being made, you know, like, in a short term. This is something that families plan for years before a purchase decision is being made. That being said, it is not that our business does not have any impact at all of low consumer sentiment. There is definitely some impact, but it is much lower compared to the rest of the consumer discretionary players.
In our case, it's more to do with the wedding dates. In terms of, you know, we as a company do not give any guidance. Our endeavor is always to achieve mid to good single digits, sort of a AAA number, and that is something which we will endeavor to achieve in the long term.
Just to add up on, I mean, you know, when it comes to weddings, we are a part of essential category. As it has been evident during COVID years also, demand in our case does not get destroyed, it only gets deferred. That is one positive situation in case of our business, which will play a very important role in H2, which we have been also focusing upon.
I'll limit it to two at this point. Maybe come back in the queue for a follow-up question. Thanks.
Sure. Thank you.
Thank you, sir. The next question is from the line of Mrs. Somil from Kotak Life. Please go ahead.
Yeah, thanks for the opportunity. Sir, two questions from my side. One is, for the quarter and going forward, you know, how should we look at Mohey's contribution? Now, do you believe it's a format where it can actually stand by its own, and we'll be aggressive enough and basically invest that, you know, into that part of the business over the next three to four years?
Sure. Thank you for that question. In terms of Mohey, you know, like we've been talking about in our previous earnings call as well, we've been seeing increasingly better demand for the product at our stores. The consumers have been responding to Mohey in a very good way. Our conversion rates have improved and so have our supply chain metrics. However, all of these trends have been seen in the Manyavar and Mohey retail concept. When it comes to the Mohey exclusive brand outlet concept, that is something that we are aggressively working on in terms of coming out with our first flagship, Mohey EBO. It's in the pipeline. You know, the whole idea and our research was that for a bride, the magical moment of when she puts her first lehenga is extremely important.
We've been truly trying to create a fantastic store in order to give her that feeling, because this is the, this is the retail idea, which we will be then expanding and taking into other cities and different sort of business development strategies. We continuously are working on it, and hopefully, we will be out with the first EBO in early Q3, and be able to see the H2 season with that flagship, along with a few other pilot stores that we will open in the financial year as well. Once we have data of how the exclusive brand outlets are performing, that is when we will be a little more comfortable in saying how we want to expand Mohey as a standalone concept.
We are very confident of the brand now, and, you know, we see great potential in the overall industry and the brand itself.
For the quarter which went by, you know, Vedant, not getting into specific numbers, but between the three large formats, Manyavar, Twamev, and Mohey, which part saw more stress over the others? Any qualitative feedback would be of infinite help for me.
So I couldn't get you properly, sir. Can you please repeat the question?
In terms of, obviously, the quarter which went by, we had a decline both in revenues as well as in terms of SSLG. Between the three formats, what we have, you know, Manyavar, Mohey, and Twamev, which did well versus others, you know, in terms of, you know, which part of the format saw more stress and decline?
Thank you for that. In terms of Twamev, because we opened three exclusive brand outlets, for the first time, spanning 22,000 sq ft area, Twamev definitely saw a good level of growth in the quarter as well, just from the pure having a small base last year and us opening three EBOs and also increasing store presence. On the other hand, Mohey also had decent growth, slow but decent growth, and that is also because Mohey's presence got increased in seven new flagship stores as well. That is how I would put it. The contribution of our other brands, apart from Manyavar, is definitely increasing. However, not commenting on this particular quarter itself, but overall, Manyavar itself is also growing extremely rapidly. Therefore, commenting on the proportion of how it will play out with other brands versus Manyavar is difficult.
Yes, other brands will definitely grow faster than Manyavar itself.
Sure, my last question, we saw a gross margin compression, both on a QoQ as well as a YoY. While I understand a part could be because of mix, because, you know, we sold less of wedding wear. I mean, is this a new normalized gross margin we should expect for the next few quarters? Probably, we suggest aberration and probably we'll get back to our 60% and 70%, you know, gross margin on a sustained level. That's my last question. Thank you.
Sure. In FY 2023, the gross margin was 67.4%. In Q1 of FY 2024, we have achieved 66.8%. You know, quarterly, these gross margins can always vary. It is also important and relevant according to us. We will compare this gross margin at an annual level. I think that is, you know, reference to FY 2023 would be more relevant compared to Q1 of FY 2023. As far as, you know, stability of gross margin is concerned, we have been able to historically achieve more than 65% of gross margins. We don't see any challenge as of now, why we'll not be able to achieve in future as well.
Sure. Thank you. Thank you so much, and all the best for coming forward.
Thank you. Thank you, sir.
Thank you, sir. We take the next question from the line of Ms. Priyanka Trivedi from Antique Stock Broking Limited. Please go ahead.
Yeah, hi, thank you for the opportunity. My first question is with regards to our Twamev new stores that we've opened. Could you give us a sense on, you know, how the ASPs would pan out versus the Manyavar in the menswear category and Mohey in the womenswear category? Of the store, what could be the store allocation to the womenswear space in the overall space?
Sure, thanks for that question. I mean, while I try to give you some estimates, it is still very early for the brand, Twamev, you know, to sort of be commenting on how the ASP would pan out over the year. Because it's a new brand and we work on bottom-up sort of data, where we try to learn what consumers are liking and then making more of that. So currently, the ASP in each of our product range approximately ranges between two to three times compared to Manyavar or compared to Mohey. In our womenswear line, it's slightly higher, more towards 3, while in the menswear line, it's more towards 2.
However, what is interesting to kind of notice is that the average bill value which we've been able to achieve at the store in the last couple of weeks in itself, is three times or slightly more than three times that of the concept that we've the kind of bill values we achieve in Manyavar Mohey. That is very positive, and overall, we will be able to continue to, you know, kind of see, in the next one or two quarters, be able to understand this data a lot better, with more consumers walking in and more bills being made.
Okay, how many stores do we intend to open in next two to three years, on annual basis? Any estimates or any forecast made on that front?
Again, as a company, we believe in being very efficient. The way we plan out stores is based on how the pilot will perform. Up until this point, the three-store pilot has been giving us a lot of confidence. We've already signed two new stores, which we will be opening within three to four months at max. At the same time, we will be signing three to four more stores in this financial year itself. Then based on the performance of the eight to 10-store pilot, which we do, we will kind of take a call on how many stores we would want to open in over the next two to three years.
Okay, got it.
From a womenswear perspective, you know, you had that question in as well. To be very honest, womens in Twamev, from the few weeks of data we have, has surpassed our expectations. While we were achieve, you know, kind of, thinking it would be slightly less than the menswear, but it's actually been performing very well, and almost it's been a 50/50 split, almost 45, 55 between women and men. We've been seeing tremendous response from all the female consumers also walking in for Twamev product.
Okay, got it. My second question was on the wedding dates front. Could you give us a guidance on, you know, how the wedding dates in the second half differ versus the last year?
Again, this is something, you know, which kind of, you know, philosophy which we follow, we see that, you know, in Q3 itself, there's about 50% more wedding dates. Even though I would like to mention that revenue/number of weddings don't proportionately change basis wedding dates. Overall, H2 has a decent number of wedding dates, which is what we see in a typical financial year historically. Last year's Q3 had low wedding dates. This year's Q3 has the normal wedding dates like any average financial year does. We are looking for a very strong H2 and almost 30%-40% overall higher wedding dates compared to last year in H2 itself.
Okay, got it. Yeah. Thank you for answering the question. That is for me.
Thank you.
Thank you. We take the next question from the line of Mr. Nihal Mahesh from Nuvama. Please go ahead.
Yes, thank you. Good evening, Vedant and Rahul. The first question was on the quarter. Approximately, what were the lesser number of wedding dates in this quarter versus last one, just to get an understanding? If you could give a bifurcation between the wedding and non-wedding revenue growth of that would just be helpful.
Sure. Thank you for that question, Nihal. About the source which we follow, according to that, about there were 37 wedding dates in the last financial year, and about 22, 23 wedding dates in the current financial year. More importantly, I mean, more than the dates, the larger factor which played out was having no weddings at all in the month of April, and almost no weddings at all in the month of July, which impacts June in our case, to some extent.
Right.
That was the larger, you know, kind of point of view, which impacted.
Basically, these are months where you end up seeing a higher ASP in terms of the collection that gets sold, I'm guessing.
Correct. You know, there was another big feedback which we were able to get from the string of, you know, sweet shops, event organizers, wedding portals online that we talked to, that a lot of people are preferring not to get married anymore in the months of June, especially because of the extremely high heat. The preference is continuously moving towards the later half of the financial year for people to get married, and they prefer to get married in the winters compared to the summer season.
That is helpful. Just a related question there was that, what would have been the contraction on the secondary level in the non-wedding wear revenues? I think that would then give a sense of what is being the impact of the ballpark consumer sentiment rather than the wedding, date mix impact.
Sure. You know, actually, we don't really have any particular data that allows us to know, wedding versus non-wedding, because the product is relatively similar. Q1 as a quarter does not have a lot of festivities. You know, so the only big festivities that Q1 has is Eid and Bakrid, where sales in our case are extremely low anyways. That is why, you know, it's not a fair quarter to give you an estimate on non-wedding sales. However, what I can tell you is that the growth in the non-groom segment was faster than the groom segment, right? That is how the things played out this year.
When it comes to the groom segment, what our training team has been able to achieve is we are continuously working on our average basket size and average bill value when it comes to the groom segment, and being able to continuously ensure the proportion of the revenue continues to stay the same, even though more non-grooms are walking into the stores.
Would you also say that to the recent Taiyaar Hokar Aaiye campaign?
Absolutely, that is the entire idea of driving those non-groom walk-ins.
That is helpful. The second question was, if we look at the way you have gone ahead and accelerated the scale-up for Twamev, which is a brand which launched, I think, four years later than Mohey. While you speak of data, the point is that Mohey has been an SIS concept for you in more than 100 stores, and there is an enough understanding. Would it be right for us to believe that in terms of pecking order, and maybe that's obvious also in terms of the store expansion, that right now you are looking at scaling Twamev, and that is the priority for the next couple of years, and Mohey will scale up at its own gradual pace?
No, I don't think that is the right way to kind of look at this. It is because Twamev, as a brand, was in pilot in Manyavar stores so that we get merchandising right. As a company, we want to remain extremely efficient. If we launch a brand with no understanding of how the product would play, then it's very difficult to set up a brand. That is why the whole strategy from the very beginning was that we launched Twamev products in Manyavar stores, understand how this sort of product price range behaves, and then we start opening EBOs. In Twamev, having EBOs is a lot more important than having Mohey EBOs, because the customer we are trying to cater to is completely different. These consumers are high-end. They require a different level of service, a different level of clienteling solutions.
On the other hand, with Mohey, our Manyavar Mohey concept continues to be successful. The only reason of going into Mohey standalone concept is so that we can scale up Mohey faster, rather than getting Mohey to more people just through this particular concept, right? I guess it's more about having different strategies for both the brands, rather than having different pecking orders. Internally, both of them have different verticals, and Mohey has more people working on them, so I would like to believe that, you know, there's a lot of work happening on both the brands simultaneously.
If I could just ask one final question, that I think you mentioned in Twamev, even for the last two months of data that's available, that around 40%-45% of the sales was women's wear, which is pretty interesting, and I'm guessing this is much more than what a Mohey contributes to Manyavar Mohey. Is it right to believe that there is a First of all, what could be the reason for this? Is there a case that maybe Mohey at a higher price point could end up having a better market than where it is now?
Well, again, like I said, you know, it's never right to comment on data from what we've collected over only very few weeks. I guess we would like to give it more time. You know, typically, there's also one big factor in play here, that we are now again in a off-season. In an off-season, what typically happens is, women start to purchase product a lot earlier than men. That is why I would, you know, kind of not like to comment on this straight away, rather watch the entire Q3 before kind of strategizing on anything based on this particular data. Typically, what we understand is, women in Mohey's market itself start to shop 45 days to 60 days earlier.
At the Twamev pricing, they start to shop 90 days to 100 days earlier in some cases. It is just a matter of time that we will start to understand this segment better and these consumers better. We would rather let, you know, some more data come in to us before commenting on this.
Understood. Thank you so much. Best wishes.
Thank you.
Thank you.
Thank you. Before we move on to the next question, ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. We take the next question from the line of Mr. Varun Singh from ICICI Securities. Please go ahead, sir.
Yeah, thanks for the opportunity. I just wanted to know that, which calendar do you follow to track wedding days?
I mean, there's quite a few, but I guess just to make it easy, there's one called Griha Pravesh, that is relatively easy to follow, and there are many other sources which we track, and then we kind of average it out.
Understood. Understood, and.
I mean, that is what Vedant mentioned, which you can easily refer to, and it is easily accessible. You know, when we try to understand the wedding dates and weddings, we use multiple channels and multiple methods to understand that. You know, when it comes to your reference, maybe that is one of the easy reference. That is what Vedant wanted to say.
Understood. Any correlation analysis historically, that you have done with regards to, you know, number of wedding days and the consequential impact on our business, especially on revenue, if you can share that?
Sure. you know, Varun, the thing is, this is something which we attempt every year at our planning stage. Now, what we are trying to understand. weddings, number of weddings are directly correlated to our business. However, number of wedding dates are also directly correlated to the number of weddings that will happen, but not to the same extent as the thing I mentioned prior to this. this whole formula of understanding how many wedding dates would lead to how many weddings is a very difficult sort of concept even for us today. We try to get it right, and in some cases, we miss it by 5%, 10%.
Typically in a financial year, what we have seen is that overall number of weddings within a financial year don't really change, unless in some rare cases where weddings have moved from Q4 to Q1. In very rare circumstances, that has happened in about one to two years in the last two decades. Typically, in a financial year, number of weddings have always, you know, been covered.
Got it. I mean, where I was coming from is to understand that how do we measure ourselves with regards to, in case there is an underperformance, so if the underperformance is explained by lesser number of or lesser count of weddings, or is that also because of not getting price product, etc. , right? I mean, because of market share loss or value migration, or because of impact on consumer wallet share due to inflation or other economic slowdown, et cetera. How do we bifurcate between the two? I mean, do you, and if you can, give some thought on that.
Sure. I mean, you know, historically, what we've seen any quarter like this, we have been able to see, you know, it's mostly because of weddings and less weddings happening across India. You know, another very interesting fact, which I would like to, you know, kind of point at the data, is that our MBO channel actually degrew by almost 40% in this particular quarter. This particular channel gives us a trend of how the entire traditional market of the country has been operating. Just this figure, which is extremely small in our case, it's under 2%, under 2%-3% of our revenue, which is the MBO business, but it gives us a good sense of what is happening in the overall wedding traditional wear market of India.
That kind of also explains signs that, you know, this particular quarter was weak across the board, for every retailer that kind of, is working in this industry.
Understood. Understood. Secondly, you mentioned in April 2017, when we did the 66% of the business in the second half. I mean, just curious to know that in that financial year, like, what was the kind of retail expansion also? I mean, why I'm asking this question is because in the current context, this quarter retail, our retail expansion was 22%, and still revenue growth was -4%. I mean, of course, -22%, steeper decline in SSV because of the wedding reasoning, et cetera. I mean, since now we are adding much more flagship stores, the big size stores, I understand, is more of an opportunity, operating leverage benefit, but the negative side also works in the similar order.
I mean, it's not higher, because we are also forced to keep much, much higher inventory even if it is not selling. I mean, but, having said that, the costs are always, most of the costs are fixed in nature. In FY 17, the way we, you know, grew revenue and margins because of 66% business in the second half, minus the information on retail expansion that we don't have. Just wanted to understand how do you look at this, you know, higher fixed cost structure of doing business, flagship stores into picture now, compared to the historical example that you shared with us?
Sure. There are multiple points here. Unfortunately, I do not recall the exact retail opening in that particular financial year, what we had, but in those particular years, we were rapidly scaling up as well, so the retail growth wouldn't have been too different. That's the first thing. The other thing is, we don't take the call on a flagship/super flagship concept without any data. It is a very data-driven approach, where only if a store is performing extremely well, showing high productivity level numbers, only then do we go ahead and open a larger store, which might be a flagship or a super flagship. There's science behind it, and that is how we have always progressed within markets as a company. We don't enter a new market with a super flagship store ever.
It's a very efficient form of making decisions, and we kind of stay strong in terms of the whole concept which we are expanding with. We see great response from our consumers walking in. There are many big benefits which we are able to see from, especially from the perspective of average bill value, which is a lot higher in any flagship or super flagship store. We are also able to see different kind of cost efficiencies in-built both for the franchisee and us, because in a large store, when there's a whole team of people running the store, you're able to bring down costs of operating it. At the same time, when we sign a larger store, we're able to bring in operating leverages through a slightly, relatively lower lease cost.
Understood, sir. That is it from my side. Thank you very, very much.
Thank you.
Thank you.
Thank you, sir. A reminder to all the participants to limit your question to one per participant. Please limit your question to one per participant. We'll take the next question from the line of Mr. Nikunj Gala from Sundaram AMC. Please go ahead, sir.
Hi, Vedant. Hi, Rahulji. You know, just want to understand the point of consumer, you know, behavior. You know, when we look at the, you know, data from the jewelry sector, for the quarter, you know, even if I adjust, I understand there is some investment element to it. Gold prices were higher for the quarter. INR 2,000, you know, pulling back, might have, you know, gained the jewelry sector per se. Even if I adjust that, wedding demand was relatively, as compared to the apparel, was okay, was not that bad. Was there any more, you know, apart from the wedding dates, more element to the, you know, discretionary spend by the consumer hurting us?
On the other hand, if you look at the apparel side, across the price point, you know, there have been, you know, pressure for the entire category. We are part of that, you know, apparel category, so that is also hurting us in this year, particularly considering the no discretionary spend by the consumer or the weak sentiment?
Sure. Thank you for that question. you know, firstly, I do believe that the lower consumer sentiments are definitely hurting us, but that is not the major reason of the slow quarter. The major reason still continues to be the fall in the total number of weddings that happened in the country. Consumer sentiments play a role, but a very, you know, sort of negligible role in our case. It's a small role that it kind of plays. On the other hand, when it comes to, you know, the jewelry sector, like you mentioned, I personally as well follow a lot of those earnings calls, and over the past also, the largest of the companies have mentioned that weddings is about 20% of their overall business. It's a very minuscule percentage.
On the other hand, we conduct a lot of consumer journey, researches. Typically, jewelry as a component is not even bought one month or two months in advance. It's bought many months in advance, basis our internal research guidelines also. These are some, you know, kind of facts which I would also like to raise.
Sir, does that answer your question? Looks like the line is disconnected for the current questioner. We move on to the next question. The line is Mr. Manushi Poddar from Motilal Oswal AMC. Please go ahead, sir.
Hi, Vinay, I have three. First one is, both this, Twamev three stores and the larger store which you've opened, are all those, franchisee, and are these under this, you know, understanding where the company pays the rent?
Yeah, thank you for the question, Manishji. Yeah, all the three stores are franchisee owned stores, and because all of the three stores are based in a very prime location, so strategically, just like any other, you know, sort of retail concept, these are on our leasehold.
this is the same for the 22,000 sq ft store which you opened in Bangalore?
Absolutely.
Okay, that's great. The second thing is for Rahul. Rahul, this primary to secondary conversion, which you have in sales, you know, how should one think of this number? Because, you know, if this quarter was lackluster and, you know, the Q2 is generally lean, why would, you know, franchisees stock up inventory? Or, you know, how should one read into this number?
Sure, sure. Basically, you know, historical trend also has been around 70+% when it comes to primary, secondary. In this quarter, it has been around 74%, mainly because of 85,000 sq ft, which we have opened. I think, this is the largest sq ft area which we have opened in Q1. You know, 85,000 sq ft, that is why, you know, when we open a new store, that is the reason why the reported revenue is slightly higher than the customer revenue. Otherwise, if you see, it is in the similar range, customer revenue and reported revenue. Whatever difference you are seeing, say, between 71%, 72% to 74%, it is because of the new store sq ft expansion, which we have done in this current quarter.
Okay. The last one, in the other expenses, how much of other expenses, let's say, if one has to look at is variable in nature or let's say, which can be controlled by you?
In terms of other expenditure, look, majority of our expenses, as we have mentioned, because our manufacturing work is also pretty much outsourced to vendors and job workers. You know, majority of it is, you know, variable in nature, because our other expenses include job cost, which is again a part of manufacturing cost. It includes carriage, freight and forward, which is again, dependent upon the sale. It includes marketing expenses, which is again, not a fixed cost. It depends upon business strategy from one quarter to another. I mean, and it has a lease cost. Lease cost is one component, I would say that, you know, that is, of course, one fixed cost nature. Irrespective of the business, we need to pay that. That is one of major cost.
Apart from that, you know, there would be small admin expenses which would be there. By and large, it would be variable, I guess.
Just one clarity, if you can give me. In this lease cost, of the entire, you know, rental cost, if I look at both, from a pre-Ind AS per se, how much of, this is revenue share in nature? That's it.
Very less. I mean, in terms of, %, revenue share is mostly in case of malls, you know, and not in case of high street, very few. I mean, it's not major revenue share.
Okay. That's useful.
It is not major.
That's useful. Thank you.
Thank you.
Thank you. The next question is from the line of Mr. Ankit Kedia from PhillipCapital. Please go ahead, sir.
sir, two questions from my side. First is, you know, a lot of the Twamev inventory we have seen in Manyavar stores as well as the flagship stores. How different is this inventory going to be compared to the Twamev EBOs, which we have now?
Actually, it's not per se a different inventory. In Twamev EBOs, we have even more higher priced product as well. The product of Twamev, which is available in Manyavar stores, is also available in the Twamev EBOs as well. However, there's slightly more collection, and, you know, you're able to see the entire collection in one store, which you would rarely be able to see in a Manyavar store.
Sure. You know, given that, you know, the manpower, which you spoke of, initially, now, do you think, you know, the franchisees you know, mature enough to hire this talent? How is the, you know, employee recruitment process being done from the company side? Are the margins for the franchises similar to a Manyavar franchisee, given that the expenses would be more higher for, you know, these Twamev stores?
From a franchisee perspective, we have only, you know, sort of opened the Twamev exclusive stores with the best of franchisee partners we have, and the partners that have been operating with us for many, many years now. It was basis opening with partners who have a great mindset only. I guess from that perspective, they have been able to do a phenomenal job, and our teams have been very supportive. And we've worked alongside in terms of creating the entire infrastructure for the store team, et cetera. The training and hospitality, et cetera, is being, you know, kind of being taken care by the company itself. From a margin perspective, I mean, this is something, you know, which we are kind of stuck to the Manyavar Mohey model for now.
Again, it's a very young brand, so the, there are certain things which we will strategically see as and how the brand grows.
My last question?
Interruption, Mr. Ankit. We have several participants waiting for their turn. May we request you to come to the question queue?
Sure, ma'am.
Thank you. We'll take the next question from the line of Mr. Nikunj Gala from Sundaram AMC. Please go ahead with your question, sir.
Yeah. Hi, Vedan. Just follow up on the previous question. you know, we had INR 422 crores of retail sales. Can you help us, like, what's the consumer behavior? you know, you saw any different from the earlier purchaser, number of articles per bill or, you know, per family, what's very different? Maybe from the, you know, product which they bought from your assortment, very different from the, you know, previous quarters or previous years in this quarter?
Not at all. Actually, you know, from the perspective of average basket size and average bill value within each of our segments, which is groom and non-groom, we actually saw a decent growth. That is what I was referring to in when, in terms of consumer sentiments also that, having spent some time at the store as well and seeing how consumers are behaving. We saw small growth in all the retail metrics which we follow, such as ASP, ABV, ABS, within each of our segments of groom and non-groom.
Okay, yeah, thanks. Thanks for that. Yeah.
Thank you, sir. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Thank you so much, everyone, for your continued trust and support in us. It is always very nice to interact with all the analysts. Looking forward to the next quarter and interacting with all of you. Thank you very much. Namaskar.
Thank you.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.