Credo Brands Marketing Limited - Q4 & FY24 Business Update

In FY24, the apparel market in India moderated after an expansion during FY23. The growth in FY23 was majorly led by a spurge in demand. Revenues at MUFTI grew by 46% in FY23 led by volume growth, changes made in the merchandise architecture and price hikes. This growth reflects the acceptance of the brand by the consumers. Basis this, the Company formulated certain business plans for the next couple of seasons.

However, softened industry trends in Premium and Mid-Premium Brands segment influenced performance in the H1 FY24. There were expectations of recovery in H2 supported by festivals & wedding season. Contribution from H2 is typically more due to higher ASPs because of increased winter wear sales.

The market for Premium and Mid-Premium branded Apparel continued to experience softened demand during H2 FY24, due to consumer behavior influenced by an inflationary environment that curtailed discretionary expenditures while concurrently witnessing a surge in consumer spends towards travel and other essential purchases. Furthermore, the onset of peak winter was delayed across India (leading to a shorter Fresh period) and that had a notable impact on winter season sales for Premium and Mid-Premium Brands during Q4 FY24. This led to excess returned stock from channel partners, on account of sluggish demand.

In a subdued market -

- During Q4 FY24, Gross Profit Margins remained stable despite the challenges faced in revenue growth. This underscores the resilience and appeal of the brand amidst challenging market conditions

- The Company invested in marketing to sustain demand. Increase in advertisement expenses related to brand building and store openings; this upfront investment will strengthen the Brand in coming years

- SSSG for EBOs remained flattish on a YoY basis The impact of delayed winter in FY24 and the softening trend in Q3 and Q4 for Premium and MidPremium Brands has impacted company performance in the second half. Accordingly, Revenue from operations for Q4 FY24 experienced a low single digit decline on a YoY basis.

Increase in certain costs during Q4 and full year FY24 which will impact profitability:

- Higher return freight, segregation, storage, and freight outward costs on account of excess returned stock. Increased inventory (adversely affecting working capital days in mid-term) - is manageable through our retail and ecommerce channels.

- Increase in manpower costs associated with the opening of a larger warehouse in Bangalore during the current year to meet growth objectives.

- Higher discounting (due to delayed onset of Winter) further impacted revenues.

- Increase in advertisement expenses related to brand building and store openings.

Looking ahead, for FY25 the Company aspires to achieve mid-teens revenue growth backed by new store openings in new and existing geographies and subject to recovery in overall industry demand for Premium and Mid-Premium Brands. The Company is also targeting to improve profitability through implementation of various cost efficiency measures.

Shares of Credo Brands Marketing Limited was last trading in BSE at Rs. 186.00 as compared to the previous close of Rs. 179.70. The total number of shares traded during the day was 140313 in over 2600 trades.

The stock hit an intraday high of Rs. 187.70 and intraday low of 173.20. The net turnover during the day was Rs. 25667011.00.

Source : Equity Bulls

Keywords

CredoBrandsMarketing MUFTI INE220Q01020 SpecialityRetail Q4 FY2024 BusinessUpdate