Ladies and gentlemen, good day, and welcome to the Vedant Fashions Limited Q1 FY25 earnings conference call, hosted by IIFL Securities 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'll hand the conference over to Mr. Sameer Gupta from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for taking time today to attend, Vedant Fashions' FY 25 earnings call. Without taking more time, let me pass it to the senior management. Over to you, sir.
Thank you. Good afternoon, and a warm welcome to all the participants. I am Vedant Modi, the Chief Revenue Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited Q1 FY 2025 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. Vedant Fashions is India's leading wedding and celebration wear company, and our business is predominantly focused on wedding dates. Q1 FY 2025 has been a one-off exceptional quarter, with extremely low or negligible wedding dates nationally, thus performing more like a non-wedding quarter. Further, there have been no wedding dates in the month of May and June particularly, hence we have envisaged the same and planned a retail expansion strategy accordingly spread across the remaining parts of the year.
As of June 2024, Vedant Fashions EBO retail area network stands at 1.71 million sq ft globally. We have a healthy pipeline for new rollouts planned for the remaining part of the financial year. In this quarter, we have focused on further enhancing our back-end business dynamics, like training, effectively administrating our large fleet of retail network, including recent launches of Twamev and Mohey EBOs for providing better consumer experience. Thus, in spite of behaving like a non-wedding quarter also, our KPIs were marginally positive in Q1 FY 2025. Primarily, what I'm talking about here are core consumer-related KPIs, reflecting business dynamics, which were very effective this quarter as well. In this quarter, we also consciously calibrated our marketing campaigns planned across the year with some social media campaigns and certain category-specific marketing campaigns across brands in this quarter.
Further, as expected in this quarter, we witnessed extremely low, almost no wedding dates nationally, as compared to the same quarter in last year, which also got reflected in our performance as well. Sales of our customers for the quarter ended 30th June 2024 was INR 3,293 million respectively. However, with a resilient business model, the company has been able to effectively maintain healthy financial margins and profitability metrics, reflecting robust financial fundamentals. Expect business to normalize from here on, and are optimistic with festivity and wedding season ahead. 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 2025 based upon the consolidated financial statements. Q1 of FY 2025 was one of an exceptional quarter, with extremely low or negligible wedding dates nationally, resulting it to behave like a non-wedding quarter for us. As a result, the business performance during this quarter got significantly impacted. During Q1 of FY 2025, the company reported revenue from operation of around INR 240 crore, and sale of our customer is around INR 329 crore. The company continues to report industry-leading gross margin of around 67.7%. The EBITDA margin is around 47.8%, and the EBITDA stood at around INR 115 crore during Q1 of FY 2025.
The company also reported healthy PAT margin of 26.1%, and the profit after tax stood at around INR 62.5 crore. Further, the pre-Ind AS 116 PAT margin is approx 27.8%, computed based upon internal management MIS. The company has been able to consistently and efficiently maintain strong financial margin and profitability metrics, reflecting resilient business fundamentals. As mentioned earlier, the quarter was very exceptional since it had extremely low or negligible wedding dates, and hence it behaved like a non-wedding quarter for us. However, we are hopeful that the worst is over, and now we expect business to be normalized from here onwards, with wedding and festive season ahead 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 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 handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue is amended. The first question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir, and good job being done on the margin front despite the sharp decline in the turnover. So my first question is with regards to the network expansion. In this quarter, we have also seen not only the absolute store network going down, but we also seen some cities also being closed. So in that context, I wanted to understand, one, whether that, you know, these cities we entered these cities quite earlier before the evolution. The second question with relate to this is, are there further store closures planned in the coming quarters ahead?
Thank you for your question, Gaurav. So I'll take this in two parts. So commenting on the first side, you know, the cities that we left technically are tier three cities, right? The reason we took a call on leaving these is because in a lot of cases, these tier three cities are dependent on a larger tier three city, or in some cases, a tier two town, where we've opened an especially larger store. So in one sense, the business has actually moved into the city center, which is not a long drive from the five cities we've actually, you know, decided to take exit from as of now. On the other side of things, you know, commenting overall, every retail business has to churn out some of their retail fleet in order to keep the fleet updated and in relevant markets.
As part of that exercise, we closed almost 2%-2.5% of our retail fleet, and that is the sort of number that we see this year as well that is going to happen. And as I mentioned in the last earnings call, we already knew that business is going to be sluggish in the first quarter, and quarter two anyway, this is a no wedding season quarter for us. So given these facts, we took a call as a company to majorly focus on store openings, starting in the later part of Q2 and early Q3, which is when major chunk of our openings are planned. Hence, these numbers are something that we had internally taken a call that this is how we should efficiently manage openings for this year.
Sure, Viran. Thanks for that. And the next question, you know, is with regards to how the season has been panning out. You know, especially Q2, given the fact that this time around we have around 6-7 wedding days in Q2, which normally there are no wedding days there. So that is one. And the other thing is the update on the new brand that you are—the new festive brand that you are planning to launch. Any updates? When can we expect that ahead?
Sure. So when it comes to July, we've seen a pretty good July. Overall, this reinforces our confidence in the remaining nine months of the year. So things have been good in July, especially with the couple of wedding dates that also fell in the month. And coming to the festive brand side of things, there has been a lot of work, and internally, the strategy, the product, the brand, everything is ready, and we expect to launch it before the next time we are meeting on this earnings call, post quarter two. So within the next two to three months, we plan to launch the brand. And the launch is in itself going to be a little soft, mostly focusing on marketplaces and the dealer network.
But we will share all the exciting news we have with that brand, with all the analysts in the next earnings call.
Just one follow-up on this one, the festive wear brand. So will it be mostly an online and an MBO-led brand, or will it be also launched in some of the EBOs?
So to start with, for the first year or so, we will only focus on the online part of things and the dealer network. And as the brand, you know, kind of gains momentum and we understand exactly the products that are working, we will also definitely evaluate an EBO strategy for the same.
Sure, Viran. Thanks for that follow-up.
Thank you.
Thank you. The next question is from the line of Sameer Gupta from IIFL Securities Limited. Please go ahead.
Thanks for taking my question. So firstly, on the wedding dates part in H2, now, when I look at, you know, these various sources available online, I see there are a total of around 445 wedding dates in H2, and this number was roughly around 42 last year. So is it just a difference of 3 days, which is exhibiting in the confidence? Or is it also a tepid consumption environment, which was there last year, and you don't foresee that happening this year? Just a little bit of clarification on this part, sir.
You know, I think there are two sides to this answer. Now, like I've been mentioning continuously, wedding dates is not directly proportional to the number of weddings that happen. And I'll explain some more nuances to this side. If you look at last year, last year, there was Shraddh was in October, and weddings was also in the later part of November. I think the first wedding date started from 24th to 25th November. And because this year things are normalized, the first wedding date actually starts in the early part of November, which is 11th November or so. And hence, you know, the business will also flourish in the entire month of October. So it's not just on the exact date, but how spread out the dates are as well.
So last year, we only got about 4, 4.5 months to do business, whereas this year we will get a complete 6 months to do business in quarter three and quarter four. So that is a more important point for us than just the pure quantity of dates, which are quite sufficient if you look at H2 overall.
Got it, sir. Is there a difference in consumer behavior also, if the dates are, like, bunched up together versus spread out?
You know, again, this is very difficult to answer exactly, but when the dates are bunched up, this leads to a very high traffic in a shorter amount of time, which is unfavorable in some cases. So it is always better when things are slightly more spread out. So not getting October as a season for shopping is very rare in our case, because typically we see a great October, followed by an amazing November and a decent December, which was not the case last year. However, as I mentioned, Diwali is early, and hence the wedding season starts early, so we should see good traction in October as well, helping things be a little smoother and longer overall.
Got it, sir. Just one more question from me. We've seen a sharp decline in other expenses, even if I allow job work, it's around a 22% decline this quarter, and large part of this is ad spends and variable rent, so which would imply that you might have cut down on ad spends materially this quarter and this amid rising competition in this space. Just a color on that.
Sure, I'll take the ad spends part. So, we had a strategic thinking around overall branding and marketing, and we've this year decided to hire a new partner. So we have one of India's best creative agencies that has now come on board as a partner to help us strategically rethink our positioning and the way we do our campaigns. And we wanted to, you know, kind of focus on the core hygiene pieces of A&P in the first quarter from two perspectives. One, as we get the strategy right for the larger season, and two, as we already knew that the wedding quarter is not something which is great, so we wanted to save money for the later part of the year.
So that's how we've kind of thought of marketing budget this year, where we'll heavily spend in the remaining parts of the year and focus on only the hygiene sides of A&P in the first quarter.
Got it. I'll come back.
Would you like to add anything on the other side?
No, I think that was the major reason for decrease in other costs, and it is good.
Okay.
Great. I'll come back in the queue for any follow-up, sir. Thanks.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Ayush from Sherwood Capital. Please go ahead.
Yeah, hi. Thank you for taking my question. So I just had one question. This is mainly this quarter, right? So do you see any consumer slowdown across the wedding segment, like from unorganized players as well? Because you'll be in touch with other people as well, right, from your industry. Or is it just that maybe we are losing share, is what I'm trying to understand.
Well, if you look at, you know, so we work with the top dealers across the country, and I think these top dealers are the best representation of the unorganized side of things as well. So I'll take your question in two parts, right? If I look at how the dealer network of our own dealer network was performing in the last couple of quarters, it was always a lot weaker than our EBO performance. So our NBO is about 3%-4% of our sales, compared to 92% of it being from our exclusive brand outlets. The 3%-4% channel was always weaker throughout the year and last couple of quarters.
However, based on the booking that we saw last quarter, you know, that shows us good confidence in the dealer network as well for all the orders that will be shipped pre-Q3. So I think that sense of excitement is also coming back across segments and markets, showing that things should be positive as we move ahead. But from your perspective, as we saw our ASPs only rising in the last year and the last few quarters also, there was no downgrading. People were buying slightly more and buying decently more expensive things at our stores. That gives us confidence that there was most likely no market share loss to the unorganized segment.
Understood. Also, just one more question. The new stores that have opened, right, like, let's say Mohey and Twaamev, the standalone stores that you have opened separate from the main brand, could you just give me an idea or favor as to how in July they're coming through, how the sales are coming through in those stores? Just to get an idea if they're actually coming through and the revenue footprint is coming through.
So all the stores that we've opened when it comes to Twaamev and Mohey, we've tried to focus on the best wedding markets of India, and these are markets that we truly understand. So across the new doors, performance has been pretty good, especially with Twaamev, Twaamev being a premium offering, that is where people tend to shop throughout the year, as this target audience actually purchases a little more well in advance compared to the Manyavar audience. So we are seeing pretty decent numbers coming in from all the new stores that we've opened. And qualitatively as well, we've seen great conversion rates, especially looking at it from a new brand perspective. On top of that, consumers have had great things to say about our stores.
The average Google review of the new Mohe and the new Twaamev stores are all averaging at about 4.8, 4.9. So from all consumer metrics point of view, things have been very good when it comes to the new brands.
All right. That will be it from my side. Thank you so much. All the best for the future.
Thank you very much.
Thank you. The next question is from the line of Varun Singh, from ICICI Securities. Please go ahead.
Yeah, thanks for the opportunity. I just wanted to understand on the number of store closure, if you can, if you want to highlight this, like absolute number of stores that you would have closed. Given what we understand is net closures stands at around 26-27 in India.
... Right. So, you know, if I, if I speak about the overall closures, there were, you know, about 23 stores that we've closed, but most of them were actually replacements that were either replaced in the last year or the new store will be opened in the next 2-3 months. The actual absolute closures that we've done were typically stores under 800 sq ft, where we felt that the market has shifted from the area we were operating in, and it did not make sense to replace this with a larger or a better experience store in the same market.
As I was mentioning earlier, in any retail company, there has to be a very small percentage, in our case, which is about 2-2.5%, that remains, you know, the kind of fleet size that we will close every year. Because the market dynamics can shift, from, you know, making the market move from, let's say, one older market to a relatively new market in the city.
Understood. Understood. In that context, like, the retail expansion aspirations that we have of 14%-15%, I mean, is there any change to that context on net area addition basis, which you want to highlight?
So we have planned our, as Vedant has explained earlier, you know, we have planned our expansion majorly in the later half of the year, that is from H2 onwards. So and we feel that we'll be able to achieve our plans and target what we have targeted for the H2. And Q1, we have kept it, we have not opened much because we knew that it will behave like a non-wedding quarter, as we were expecting. So we feel that we will be able to achieve what we have planned for in, for the financial year in H2.
You know, so again, like, like it comes to business development, we have a 3-4-year plan when it comes to business development. So things might move from one quarter here and there, but at an overall macro level, things are pretty well aligned.
Got it. Got it. Understood, sir. And just one last question on Mohe, like, incrementally, how is the standalone store is doing? So if you can give some color on that.
Yes. So in terms of the Mohe EBO that was opened in January, we've seen great response from the consumers. The conversion rates are very healthy, and on top of that, you know, we've seen good inventory turn ratio as well. And overall, all the retail KPIs that we've been witnessing have been positive. However, as the store has only seen a few months, and all these few months in relative terms were not the best of the wedding season we've seen, I think we will be in a much better position to comment on the overall performance as we even see one full quarter of great business. So after seeing Q3, we will be in a much better position to speak about how the overall performance of the EBO is.
Understood. That's it from my side. Thank you very much, and wish you all the best.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Nihal Jham from Ambit Capital. Please go ahead.
Yes. Good evening, Vedant and Rahul. One question was that we've obviously exited 5 cities. I just wanted to get a sense from you that when you look at, say, brand Manyavar, what is the kind of city potential that you see? Because ideally, say, for a brand which is still 15 years old, wouldn't believe that, you know, you may need to leave certain cities. So just wanted to get your comments on that.
Yeah, sure, Nihal. So, you know, there are two sides to this question. So broadly, what we understand is the potential today lies in any town or city with more than 1 lakh population, or a catchment of towns and cities that can give us more than 1 lakh of population. So that is the kind of focus market that we have. Today, I believe this number would add up to about 250, 300. But as the new census report comes out, I think this number should be somewhere closer to 400. So that is our overall understanding as of today within India.
On the other side of things, like I was explaining, that we've taken a strategic call to not open a lot of stores in Q1 and early parts of Q2, and the five cities that we've left per se, is majorly on account of having a better store in the nearby market of a town. So technically, the residents of the towns we left were going to another town. So technically, while it shows we've left five cities, it's actually a replacement in practical terms. And these replacements have taken place before this quarter.
Understood. Just final question on this was that, in your plan for, say, the next 6-9 months, what will be the approximate number of new cities that you are thinking of?
Sorry, Nihal, you are really inaudible at this moment.
I am so sorry. Am I audible?
Yes, yes.
Just a follow-up to that, was that in your plan for the next six to nine months for F 25, how many more cities are you planning to enter into, if you have that at this moment?
At this moment, I will not be able to comment on exactly the number of cities we are planning to add. But overall, you know, what we've, what we've been, you know, kind of commenting as well, is that Tier one has shown decent performance, whereas the major laggard has been Tier two and Tier three. So it is the kind of moment that we're seeing in the industry. And just adding on top of that, July is actually the first time that Tier two and Tier three is actually outshining Tier one. So this is giving us great hope in terms of the potential that Tier two and Tier three is bringing back. So because of the earlier months, we were kind of slowing down openings when it comes to Tier three and Tier four cities.
However, if the trend that we see in July continues, we will definitely try to enter a larger number of cities than planned initially for the year.
This is helpful. Thank you so much, and I wish you all the best.
Thank you.
Thank you. The next question is from Tejas Shah from Avendus Spark Institutional Equities . Please go ahead.
Hi, hi, Vedant. Thanks for the opportunity. Just, just one question on competitive landscape. You—I believe you briefly touched upon competition from unorganized. Just wanted to know how the competition from organized segment is shaping up, and what's your read of being that competition around for at least a year now?
Sure. So, you know, I would like to highlight an internal study that we have taken up. So we evaluated every single organized retailer in this industry that has more than 10 stores, and we plotted every store that has opened in the last couple of years across India. And what this study showed us.
Mm
... is that when we compare the performance of our own stores that are next to any competition that has opened up, versus the performance of the city from a like-to-like perspective, then the stores that are actually next to the competition have a 4% delta. At the same time, there is about 15%-20% of our cities where competition has opened up. Even when we compare the performance of these 15%-20% cities versus the remainder of our fleet, what we see is that these cities where competition has entered again have a 4% delta, which is positive in terms of like to like. So these stores were actually less impacted.
Majorly, what we understand from this data is that the entire sort of reason why we've seen impact has been on account of weddings, majorly, and there is definitely a little bit of impact of consumer sort of behavior and the overall economic conditions that we've seen in the last couple of quarters, but majorly on account of weddings.
Okay. And just one question, it's more of a seeking insight from you rather than a question. We have seen it in Tanishq journey of last 20-odd years, that when they opened very large stores, initially consumers were daunted, or it was intimidating for at least upper middle class to kind of step into the store. When we are consolidating our smaller stores in favor of large stores, what is your observation? Is this, are you thinking that there's a marginal customer who's kind of not coming because he's not used to such larger stores?
I think, you know, this is a very interesting question that you've asked, and this is something which we typically also hear from some of our traditional partners as well. But when we, you know, kind of track data of moving from a smaller store to a larger store, we've not seen this happen practically as much. Even when we have a smaller store next to a larger store, what we see it's more about ticket size. So someone who just wants to buy a kurta might be going to the smaller store still, but anyone who wants to buy anything more than a kurta wants to experience the larger store. So that is the kind of thing which we've witnessed right now.
But people who are in the wedding market are buying brand in many cases for the first time, so they are expecting the brand experience. I think, you know, the Indian consumer is a lot, lot more confident than they were in the last decade or so, and their entire mindset has also evolved.
Got it. Got it. That's all from my side. Thanks, and all the best for coming quarters.
Thank you very much.
Thank you. The next question is from Archana Menon from Morgan Stanley. Please go ahead.
Hi, Vedant. Just a few questions from me on the store closure part. Firstly, do you think, while I understand the shift because of the demand environment, do you think in the full year you will still sort of maintain the 15%-17% retail area addition that you usually do? The second point to the store closures also, how does this impact the franchisee level relation? Are these the same franchisees who have opened stores in the larger towns? Also, would there be any inventory write-down that you would need to call it please?
Sure, I'll take the couple of first parts of the questions. So when we look at the full year, we have a very decent pipeline for store openings, starting at the later parts of Q2 and then overall in H2. However, you know, while the overall expectation from our end is to ensure that all the stores are open, things can move from one quarter to another. However, at a midterm level, if I am talking two to three years or three to four years, the pipeline is very healthy, and that is sort of the 14-15% sort of a number is where we aim to be when it comes to store openings from a square feet percentage perspective. From your second question perspective, you know, there are two kinds of stores. One, which is majorly replacement.
So in a lot of cases, these are the same partners that are replacing the store, moving to a better place in the market or moving to a better part in the city. In some cases, where we've taken a call to move out of a very small Tier 3 town, these again are stores where we've been operating for more than 6-7 years. The partners have made decent money, and now we've taken a call to exit that market and move to a slightly more modern market, where consumers are now willing to go over the market we've exited.
Just final, the inventory write-off?
Naveen, if you would like to, you know, kind of
So we have been able to efficiently monitor and maintain the inventory levels effectively, during all the periods, even in Q1, and our deadstock has been pretty negligible. So from that perspective, we don't see any challenge at all.
Got it. Just one final question from me. Just a bookkeeping number: Would you have an update on the number of franchisees or share of revenue from franchisees who have more than, say, two stores?
I don't have the number off the top of my head. We are happy to share it with you after the call. But it has increased over the last couple of years, because we've had a very large focus on growing with our existing partners. So this number has definitely grown, but we'll share it with you after the call.
Got it. Thank you.
Thank you very much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Chirag Lodaya from ValueQuest. Please go ahead.
Yeah, thank you for the opportunity. My first question is on Mohey. So what is the EBO rollout plan for this year?
Sorry, sir, I couldn't fully understand your question.
What is the EBO rollout plan for Mohe brand?
So we've opened one high street flagship EBO for now, and at the same time, we've opened a couple of mall EBO stores for Mohey. And the pipeline for Mohey and the focus for Mohey is to find the best stores in top five to six wedding markets of India. So by the end of the year, we expect to open a few, and some of them will be opened in early parts of next year. So that is the kind of focus we have. The goal is to be available across different regions and across different tiers, so that we're able to understand how the Mohey EBO performance will be from a future perspective. So the goal is to try out every kind of business development opportunity out there, as part of the pilot for Mohey EBOs.
Okay. And in terms of composite stores, in how many stores you will be present today?
150 plus stores will be there.
Okay. Are there any plans to add more in existing location?
Yes. So, you know, if you look at last year, Mohe. So Manyavar Mohe, when we look at that concept, and we look at the sq ft that was opening in Mohe, so Mohe grew by 40% in terms of sq ft last year.
Okay. So out of-
And-
total sq ft addition, 40% was towards Mohe?
No, sorry. That's not what I'm saying. I'm trying to say if Mohe was X sq ft-
Okay
... in FY 2023, then in FY 2024, we were 1.4x.
Got it. Got it. And, second, I just wanted to understand, out of the total network, what percentage of network would be on FOFO or Foco, where we would be paying the rent?
So, COCO is very negligible. There's about 5, 6 stores in Calcutta that are still on COCO. These are the older stores that we have, and we've kept them more from a traditional aspect and a historic angle. Majorly, what we operate on is Foco and FOFO, and when we talk about the store where we pay the lease cost, about 65% of our revenue comes from these stores, and the remaining 35, 34, 35% revenue comes from stores where it's a full FOFO model.
Mm, got it. Got it. And just lastly, on ANP and pricing, so is there any pricing change you would have taken this year?
There have not been any direct pricing as such, but at the company level, our ASPs have slightly grown. This is majorly on account of Mohe and Twaamev being on a lower base and growing faster, and both these brands have a higher ASP than Manyavar.
Like-for-like pricing is similar?
Like-to-like pricing is very similar, yes.
Right. And just lastly, on ANP, if you can call out the number, what was the spend in this quarter versus base quarter?
This quarter was a negligible sort of ANP. We did about 2.5-3% in terms of ANP, and typically this number is 5%-6%. The major reason is because we were not expecting a very grand wedding season, so we wanted to save up and focus majorly on H2.
Got it. Thank you and all the best.
Thank you very much.
Thank you. The next question is from the line of Mithun Aswath from Kiva Advisors. Please go ahead.
Hello?
Hello.
Yeah, hi. Just wanted to get a sense of, you know, what, what kind of opportunity size do you see in Twaamev, because it's catering to a higher-end, sort of market? And what are the current revenues you are getting from that, segment, and where do you see this going over the next, two to three years?
Well, you know, if we look at Twaamev, Twaamev caters to an audience that typically falls in the income bracket of about, you could say, INR 50 lakhs-INR 4 crore annually. And this segment in India, while small, has a lot of spending power. So overall, we estimate about 15%-20% of the overall market in the next 3-4 years falling in the Twaamev PG audience. That is why we've planned to invest a lot of money and time into this brand. And we've been seeing very good numbers over the last couple of quarters since especially we started to open EBOs.
While we don't give out Twaamev numbers, particularly, what I can tell you is that the growth has been a lot faster than the company average, hence, the share of Twaamev as a percentage of company's revenue has been increasing, quarter-on-quarter and year-on-year.
Yeah. Also, I just wanted to understand, the margins are also higher here?
Well, there are two sides to it. While you could say the absolute margin we make on any product is higher, however, the gross margins today are slightly lower than the company average, and as the brand starts to scale up, the goal is to reach the company level average.
Right. But do you have, like, a scale-up plan in terms of number of stores of Twaamev from currently to where you want to get to over the next 2-3 years?
Absolutely. So today we stand at about 5 odd stores. There are 3, 4 more stores in the pipeline currently, and the goal is to first start operating a store in the top 30 wedding markets of India, which is a position we want to be in the next 2-3 years. And when we say 30 markets, these all these stores are super flagship stores, so very big in size and have a grand façade, and ideally positioned in the best place of the market. Hence, finding these stores is a little more difficult, but the idea is when Twaamev enters a market, we want to be the largest premium wear brand in that market.
Just a last question. You know, I really need to commend your kind of, your service quality in your stores.
To come back for a follow-up question.
Hello. Can I just-
I request you to come back for a follow-up question.
Okay, fine.
Yeah. Thank you. The next question is from the line of Prateek Parekh from ICICI Prudential Life. Please go ahead.
Oh, hi. Thank you for the opportunity. So, yeah, hi. My question is on specifically your July performance, since you've said that July has been better. And if you can quantify how has been the SSG performance in the month of July only?
Unfortunately, this is something we will have to wait for till the next earnings call. But qualitatively, it has been pretty good.
Can we say that it has turned positive, if not quantitatively?
Yes. I mean, from a July to July perspective, SSG right now is positive. But, I don't want to get into the specifics of it at this time.
Got it. Got it. And second question is on, you know, Q2 performance. Obviously, I'm not asking for the forward-looking statement, but since this time around, we've seen that the festive is a bit early. So, isn't it that your performance improvement, you know, expected to improve from Q2 itself, rather than hope, you know, hinging on performance improvement from H2? What's your sense?
Yeah. So actually, there are two sides to it. While definitely we are striving towards improving the numbers starting Q2 itself, the reason we are mentioning H2 a little more is if you look at the base of Q2, the base in itself is small.
Mm.
So even if there is growth, the major chunk of numbers actually lie in H2, and that is where even a little bit more growth is more important to be delivered. Hence, the more focus on H2 numbers versus Q2.
Okay. Okay. All right, thanks.
Thank you very much.
Thank you. The next question is from the line of Sabyasachi Mukherjee from Bajaj Finserv AMC. Please go ahead.
Yeah, hi, Vedant. I have a question. Just to understand a bit more on this, wedding dates, how spread out it is or how bunched up they are, and its effect on sales and consumer behavior. I presume we have around, the bride plus groom sales about 45% odd, with the non-groom sales is about 30-35%, and balance, 20% comes from about festivals. So just, just to kind of, connect the dots, let's say if the wedding dates are bunched up, then the non-groom sales go down, that 30-35% sales go down because people are probably not able to attend more weddings, because multiple weddings are happening on the same day.
Hence, it is better to have a well spread out marriage season rather than a bunched up season, where sales might... From our perspective, sales might get impacted because our non-groom, non-bride sales, you know, get impacted. Is that a fair understanding or, I mean-
So partly, yes, I would say. But see, the thing is that even when we say that, it's wedding attendee-related sales, these sales are more focused on the very immediate family today. Those are the guys who are buying new clothes, when we talk about the kind of CG that we are catering to, not the casual wedding attendees. That doesn't make the larger chunk. So the only benefit that spread out dates give us is that there are more days to serve consumer, and hence, the stores are able to cater to a higher number of individuals overall. So that is the advantage of that. And at the same time, I would not say that, you know, because people are not able to attend weddings which are on the same day, because typically...
People who are just attending a wedding and not the immediate family, so they are not buying new products to go to a wedding. That is the endeavor of our company, that we get to a position where everyone attending a wedding is also wearing Indian wear.
Okay, okay. So, so, just, just a follow-up to this is, you know, when you say that, when wedding dates are bunched up, then people, you know, turn out in the store, and there is, obviously, a capacity constraint. Maybe at a particular time, a store of yours, can't hold a certain number of people more than that, and that is why we are probably opening up larger store. Is that the thought process?
Correct. Especially, so the mindset that we have with larger stores is that we have a benchmark number in our you know systems. If productivity of a certain store is hitting certain thresholds, that means we are losing out on a certain percentage of business, and that is when we take the call of opening a larger store in that market.
Got it. Got it. Very clear. Lastly, on the July trends that you know you mentioned that Tier 2 and 3 has somehow you know come back in terms of you know wedding sales and all. Any more color on this? I mean, compared to Tier 1 or metro, how good the Tier 2 or 3 sales have been in July?
As much as I would love to speak a little bit more about it, I think the only reason I would, you know, kind of, not give more details on this, is because July is a very small period to make assumptions on, and plus, the base is also pretty small. But overall, what we've seen in July qualitatively, tier two, tier three has outperformed tier one, and overall, all three tiers have grown.
Great. That's heartening to hear. Thanks. Thanks, Vedant. That's all from my side.
Thank you very much.
Thank you. The next follow-up question is from the line of Mithun Aswath from Kiva Advisors. Please go ahead.
Yeah. Hi, sir. I was just trying to commend you on the kind of service quality is there amongst your stores. You know, they are much, much better than the competition. I just wanted to understand how do you maintain that service level amongst your staff, which is kind of homogeneous across your stores? Because, you know, I've tried to do a survey amongst your competition as well. You still stand out quite a bit. So I'm just saying that is a big differentiator. How do you maintain that, and do you see some sort of stress because of people being poached? Or just wanted your thoughts on that. I just wanted to understand.
Thank you very much for the compliment, and I think it's majorly because of the mindset with which we do retail. Our entire training is around consumer service, and that has been the major focus from day one. We've, you know, sort of adopted a lot of internal policies. So this is something we picked up from one of the CEOs of a hospitality company and made it one of our mottos in retail training as well, that the core product that our retail team is actually serving for is a smile to the consumer. Anything else is a supplementary product. So we've kind of focused on certain ethos in the company that has allowed us to get to where we are. Plus, at the same time, with our franchisee partners, we behave like a family. We have very flexible policies.
What we understand, happy franchisee partners result in happy fashion advisors, and happy fashion advisors result in great service to the end guests walking in.
Yeah, I'm just trying to understand, how do you maintain that? How do you monitor this, that consistency?
You know, there are three sides to this as well. So one is that we have a large team of about 50 people, on the ground by the company, who are responsible for training all the people at the stores and ensuring everything we learn from one store becomes a, you know, a sort of a learning for all the other stores. So that is one side to it. The second is we have a very strong franchisee scorecard system, and majority of the points in the scorecard are linked to consumer experience-based KPIs. So again, we monitor this very closely, and the endeavor is that every franchisee should be over, above 80%.
However, in case franchisees fall below 60%, then we put them in a training plan, and after multiple quarters, if this plan does not help them improve, then we replace them with a franchisee who we believe will provide better consumer experience. On the third side of things, we also have our internal auditor do mystery audits. We also have a separate retail team doing just mystery audits. And on top of all of these, there's a lot of tech intervention that is happening now. So what we've done is we've tied up with AI vendors to have our cameras now being powered by AI that throw back some consumer experience data. We've also now launched a training app.
So by the end of this quarter, we will have a training app in the hands of every single fashion advisor in the country, with new training being deployed to them on a daily basis. So that will also, you know, sort of remove all the Chinese whispers that exist in the retail industry, and the training team will be directly able to talk to our fashion advisors. So a lot of initiatives overall from a mindset and execution perspective happening over the years, that sort of lead to high service levels.
Great. Thanks so much. All the best.
Thank you.
Thank you. The next question is from the line of Rishi Modi from Marcellus Investment Managers. Please go ahead.
Yeah. Hi, Vedant. Hi, Rahul. Can you hear me?
Hello. Yeah, hi, we can hear you.
Yeah. Just, first on the accounting side of things, your employee cost is down YOY. Is this something you want to highlight, some qualitative comments on this?
Yeah, sure. So there are two elements to the HR cost. One is normal HR cost, and then there's a director remuneration. So the normal HR cost has increased by 11%, and director remuneration has actually gone down because there was a re-revision in the structure from July onwards last year. So that is the reason. But overall, other than director remuneration, the HR costs have gone up by 11%.
Okay, got it. And on the other expenses, you said the major component is ad spends being reduced to half their spends. So, any other expenses that you have back? And secondly, for the full year, do we maintain the 5%-6% trajectory for ad spends, and hence we go overboard in Q3? Or, for the full year, we won't be able to spend that much, or we won't be needing to spend that much.
So, Rishi, you know, again, we'll try to be as efficient as possible. But I would say that 5%-6%, I think, is broadly something at a yearly perspective, which we would still look at from an EMP perspective. But if we see something is not required, we will not do it. But I still think that from a planning perspective, 5%-6% is a good number to assume for the year.
Okay. Apart from ad spends, any other costs that have come down on a year-on-year basis in absolute sense for the quarter?
If you compare with Q1 FY2025 with Q1 FY2024, ad spend was a major component, I would say. I mean, it, it went down by INR 98 million. Out of a INR 160 million drop in other costs-
Mm.
Majority was advertisement only, and the other costs, which are not very major, which has gone down.
Okay. All right. Second, I wanted to understand, you mentioned that you changed your ad agency. What's the reason for that? Because, you all have built a pretty good narrative till date around your, and all those things that you all have built out in Manyavar over Mohey and all. So just wanted to understand what's the rationale?
So the, you know, thought process was to, you know, just more evolve. So I think, the way our marketing team used to function earlier was, we would collect strategy and insights internally, and then our partners would help us create great ads. But we wanted to become more mature in our thinking, have multiple people in the room who are part of this conversation, who challenge us in our thinking, and that is the main reason why we decided to go ahead and move to a more strategic marketing partner overall.
Okay. Any other clients that this new ad agency has worked with, some work we would have seen so that we can-
Yes, so it was a large evaluation. We met probably every single top agency in India. So we've signed up with McCann, I think. You can check their work online.
McCann.
They work for a large number of global brands.
Okay, all right. Finally, just wanted to understand, you mentioned in the past calls, right, and I think someone also raised this issue, where when Q3 gets bunched up, the weddings actually don't happen in the same quantity because of some wedding hall infrastructure issue in the country and all. So just wanted to understand, are we gonna face the same issue in Q3, and hence the expectation needs to be moderated for Q3, Q4? Or are you thinking that the infrastructure will be there, the new stores with the larger sizes will be able to handle the customer footfall, and hence for the full year, we'll be able to go back to the INR 10,000 sales per sq ft? Like, just wanted your understanding on this piece.
Yeah, Rishi, so our understanding is that, from currently what we hear from the market, the kind of confidence we see in all the people of the industry, we don't see any challenges, for the remaining part of the year. I think we are quite hopeful, motivated and excited all at the same time, for how things should be in the remaining nine months of the year, both from a number of weddings perspective, and I think we've invested a lot in our own infrastructure as well, to cater to all the demand that possibly could come to us.
Okay, and we'll be back to, say, FY 2023 productivity levels. Because last year also we declined in productivity, so just trying to understand whether the base... Hello, can you hear me?
Yes. Yeah, we can hear you.
Yeah. I'm just saying, should we be taking FY 23 as the base to build on, or, or FY 24 as the base to build on for this year?
While we don't want to give any guidance, I think our strive is to do every possible thing we can internally, be it the best-in-class assortment to the renewed, refreshed marketing plans, a lot more efficiencies in our media channels, the best-in-class retail operations team. So I think we are doing possibly everything we can as management and overall as a company in order to drive towards that growth, but it is very difficult for me to give you a quantitative number to this.
Like, I'm just asking, what are you internally benchmarking your productivity against? Is it the FY 2024 number or the FY 2023 numbers?
I think the way we read reports is majorly buy-side. So internally, that's how we look at things. So it's more from a last year comparison rather than a FY 2023 comparison. However, definitely we would like to keep benchmarks from a productivity point of view as high as possible. Difficult to say if we'll get there this year, but the aim and the endeavor is always to have the highest possible productivity we can.
All right. Okay. Yep, that's it from my end. Thank you.
Thank you. Ladies and gentlemen, we'll take this as the last question, and I'll hand the conference over to Mr. Samir Gupta from IIFL Securities Limited for closing comments. Samir, sir?
Sorry, sorry, I was on mute. Sorry. Thank you, everyone, for participating in this call. I'll just hand over to the management for any closing remarks that they have.
Thank you very much for attending. It's always great interacting with all of you. Positively, as a company, we'll do every single thing possible in order to ensure that we make the most out of the remaining nine months, and looking forward to interacting with all of you again soon.
Thank you.
Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.