Brand Concepts Limited (BCONCEPTS) Earnings Call Transcript

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q2 and H1 FY '26 Post Earnings Conference Call of Brand Concepts Limited. Today on the call from the management team, we have with us Mr. Abhinav Kumar, CEO; Mr. Kalyan Maheshwari, President, Accounts and Finance; and Mr. Manish Peshwani, Vice President, Commercial. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the period ended September 2025, the growth plan and vision for the coming years, post which we will open the floor for Q&A. Over to you, Abhinav.

A very good afternoon, everyone. This is Abhinav this side, and thank you for joining our call today. I think this time, we've given a summary of our performance highlights, and I'm sure everybody would have gone through it. But just to recap, so we're very, very happy to announce the highest ever top line and EBITDA in terms of our performance in this quarter. The revenue is up 26% year-on-year, and the EBITDA is up 33%. From the preceding quarter, I think we are plus 33% in terms of the revenue growth. We've seen a good growth happening all across our channels. The good part is that it has been fueled by all the channels. However, particularly mentioning our e-commerce marketplace operations, which I've always talked about that we focus a lot on the marketplace because it gives us a better sort of handle. That has -- that business has surged by 63%, while the overall e-commerce is at 23% growth. Large format also in this quarter has delivered a very good growth. It is also fueled by a lot of business development activities and point-of-sales expansion in large formats. Our margins, I think, are pretty much intact. In fact, they don't fully reflect the strong sales growth and gross intake margin expansion as we continue to invest in future growth and capacity building. However, we still have delivered a -- the challenge is when you go for a high growth, you generally tend to compromise on certain margins. But I think I would give a lot of credit to the entire team that we've been able to grow while not letting go of our margins. So we've sort of kept our margins intact. And hence, it is quite evident in the EBITDA figures. I've been saying for a company of our size, we've made a sizable investment in CapEx in totality, you see we've made almost a INR 35 crore investment in the hard luggage as well as in the new warehouse facility -- the new warehouse facility. Both the investments are Phase 1. So we will continue to invest going forward as well. So this obviously will have its effect on higher depreciation and interest costs in the initial few quarters. But however, I'm very, very confident that in the future, we'll see the true benefit of all these investments. We continue to expand in retail. We've opened 5 new Bagline stores this quarter. And all the locations that we've opened in Aerocity, Delhi, Oberoi Mall, Bombay, Mumbai Airport, Bangalore Airport, all these are very premium retail zones. So we are solidifying our position in all the premium retail places. Obviously, we -- internally, if I say -- though if I look at -- if I compare Aeropostale from last year to this year, we've grown pretty well. However, we had higher expectations from the brand, but it's still not opening up to its true potential. And we believe that in the times to come, we should be able to capitalize on that brand as well. External challenges, we tracked and we realized that in the past few years in our segment alone, more than INR 600 crores of capital infusion has happened. And hence, there are new age companies, there are legacy companies. Legacy companies obviously are obviously well leveraged, sitting on huge cash piles. The new age companies with a lot of fund infusion and raising of capital, they are also flushed with funds. And we continuously see that they continue to burn aggressively, driving up talent costs, driving up EBO rentals and all of that. So we continue to see that challenge. However, we have our own strategies to overcome those challenges. And of course, investing into our own manufacturing is a step forward towards that strategy. You will see increased borrowing also. Obviously, it is towards funding of higher working capital requirements and the CapEx towards the hard luggage plant and stores and warehouse and all of that. We -- in terms of business development, we stay focused on our strategy as a multi-brand licensing company. We -- our focus is on brand-wise positioning to maximize portfolio strength. We are segmenting the brands under various price proposition. So we want to get into the value segment also now. And the value segment would be aided through our own manufacturing setup. And it should -- I'm very, very bullish. I'm very hopeful that, that leverage also will start out to play in the years to come. While keeping our premium positioning intact. Tommy Hilfiger continues to show a very robust growth. Benetton has further grown this year. And we've solidified our position further by taking on Superdry, which we announced very recently. So Superdry is going to announce our position in the premium segment. It's a very prestigious partnership for us -- for Reliance as well as for us. For us also, it's the first brand that we're doing with Reliance. And I think for Reliance also, I think we are one of their first licensees that they have signed. So as a partnership, both of us are very, very confident and looking forward to doing some meaningful business together. Yes, with that, I conclude my this thing, and I'd like to open the house for the Q&A.

[Operator Instructions] So until the question queue assembles, Abhinav, can you throw a bit of light on what steps or actions did you take that saw us seeing such a huge improvement in the turnover growth. And in spite of that, you were able to maintain your margins. If you can throw some light on that thought process while people assemble for the queue.

Right. So essentially, from June itself, we have started changing our stance. So wherever price corrections were also required, we did that. And I had hoped that -- so till about last year, we were also holding on to a lot of new product launches, Vinay, because most of the products were, again, in the premium segment and taking the pricing higher. And while we were looking at that the market is going the other way around, we sort of held on to our new launches as well. So post June, we sort of decided to move ahead with certain newer models with price corrections. But at the same time, we also -- we had the product pipeline ready. We started launching the new products as well. And actually, much to our surprise, we saw that the 2 best-selling products that we had, one was our top-of-the-line product. That was also a best seller and our entry price point, that was also a best seller. So gave us a lot of confidence of launching more products. So I think we've seen a lot of product launches in various brands this year, this quarter. Tommy alone, we've launched almost 4 to 5 new styles in the past 3 to 4 months. So I think all of that, plus a renewed focus towards e-commerce, our e-commerce portfolio is strengthening. Our operations are strengthening. So I think all of this put together has helped us. In terms of marketing, we've invested a lot in marketing. We continue to invest. So all of this put together, I think, has resulted into this kind of work.

Sure. We'll take the first question from Ishpreet.

So good comeback on the P&L side, but yes, a little bit of disappointment on the balance sheet end. So just trying to understand, so the new changes like you just mentioned that you've done for the brands to do well, does this mean that this inventory and receivable is a sustainable one? Or do you think it's a short-term thing and it should come back to normal?

No, I think working capital as we keep on expanding in the newer brands, it would take a toll on the working capital for some time. And I have mentioned this in the past also that hence, our working capital requirements will continue to grow for a certain amount of time. Once the brands start stabilizing, that's when you will start seeing these numbers.

Okay. So it's nothing related to maybe the slight sales mix or something?

No, no. It's not particularly related to sales mix change or anything of that sort. So the new brands, as I said, once you expand this, you will have stock, you'll have all of that.

And generally, it takes a year for the brands to settle and start performing and showing.

I would say about 3 seasons. One season is about 6 months.

Right, 3 seasons...

Three seasons and you'll start seeing things look [ bright ].

Right. And are there plans to add any more new segments or new brands?

No. Right now, I would say that we are pretty much sorted now. Juicy Couture, we are -- as I mentioned earlier also, Juicy Couture, we are looking at amending our agreement. And hopefully, we should be able to do that as -- we should be able to make an announcement soon. Where we are adding probably more categories because we invest so much into the brand of the mother category as well. So that's something which is ongoing. But in the lieu of that, what we'll also do is today, our terms are of 15 years, which is a 10 plus 5. And hopefully, now the term would be a 20 years. So it will be a 10 plus 10 year renewal. It will increase our tenure. So apart from that, right now, I don't see any major addition of brand today because we're pretty sorted. I would want to now first consolidate and grow these brands. But yes, if there is an opportunity which is like a no-brainer, then probably we might consider. But at the moment, our outlook is that we don't want to increase more brands.

And Juicy Couture, if I see like I have visited a few stores here and there while traveling or in Mumbai itself. So some of the stores don't have the Juicy Couture. In Mumbai also, I saw 1 or 2 stores, right? There was -- so is it like a stage-wise thing and maybe it will be restricted to a few places only, Juicy Couture?

You're talking about Bagline stores, Ishpreet?

Yes, Bagline stores.

Yes. See, Bagline stores currently, as I mentioned earlier also, we have a limitation of size, right?

Correct.

So currently, Juicy Couture is available across, I think, 17 or 18 stores of Bagline. Not -- 20 stores across -- around 20 stores of Bagline. So we've not been able to launch it across all the Bagline stores. So yes, you're right that it is a phase-wise approach. We also look at it from the point of view that if it is a city where the higher ASPs are doing well, that's where Juicy Couture fits in better.

Okay. And if you could also maybe mention how much of sales would it be now, Juicy Couture? Is it a meaningful number?

So I would say in the H1, we've done INR 5 crore sales in Juicy. Which if you ask me, given that we launched only in April, I think it's a very good figure.

And sorry about the earlier discussion we had on the working capital. So these levels of working capital should stay another 12 months to 18 months till the brand picks up in sales?

Yes, about at least 2 to 3 quarters at least.

We'll take next question from Yashowardhan.

So it was very heartening to see the growth coming back after so long. So congratulations on that part. And we all know that the industry has been quite competitive. And even when the last time we interacted, you mentioned on that, that we have reduced our prices. I think that would be one of the reasons why the growth has come back. Is that assumption correct? Or how is the industry scenario in terms of, let's say, demand and then competition, if you could touch on that?

See, as I mentioned, Yashowardhan, that, yes, we have corrected our pricing as well. But at the same time, I was mentioning that in our bestsellers list, the exit as well as the entry, both were best sellers, right? So that's what -- for us, at least we've seen traction happening on both the ends. However, yes, pricing has also been one of the factors where the growth has come from.

Okay. Okay. And sir, in terms of competition or the pricing from the competitors as well, since one of the industry leaders have been acquired, so I think they might be keen on making profitability better, right? So are we seeing prices in industry getting increased or to the base level as to what they were before? Or is the new pricing the new norm, normal?

I would believe this pricing to be the new norm, Yashowardhan because today, I think the large players are also not coming back on the pricing. So I understand one of the competitors has been bought on, but balance 2 competitors, the legacy players are still very much in business. And I haven't seen price -- yes, there has been minor price corrections here and there, but the pricing has not come back to its -- what it was 2 years back. So those pricing levels, I don't think they're coming back.

Okay, sir. And -- so what -- so GST has been reduced, right? So are we seeing any benefit of that in terms of demand revival or increase in our pricing power? Any comments on that?

In our category, the GST remains the same, Yashowardhan. So we were earlier also at all our categories were at 18%, and we continue to be at 18%. But yes, the GST impact overall on retail has been very positive. So from a retail sentiment perspective, yes, GST has left more money in the pocket of the common man.

Okay. And if you could share an industry number that what will be the volume growth because even though the pricing has been corrected, but there must be volume growth, right? So any number that we must be tracking? And what would be that number for us as well?

Yes. So see, in terms of volume growth, so -- before that also, I would like to actually mention that the results that you see are obviously consolidated figures, which include our retail as well as the manufacturing division, right? And if I look at the retail alone, I think from a growth perspective, we've done much better in growth. So if I talk about retail alone, our retail division, we've grown by 33% year-on-year. From last quarter to this quarter, there is a 33% growth. And if I look at H1, our overall growth is at 15% right? So from that perspective, from a retail perspective, yes, our growth has been good. The volume growth over here would be -- it depends on category to category, but I would say that it will remain in a similar percentage, probably in certain categories, it might be a couple of percentage points higher where you've had some price corrections. And in certain categories where the pricing has been flattish, it will remain that. So I would still say that our value growth is sort of corresponding to the volume growth.

Okay. Got it. And sir, in terms of overall portfolio, if I look at, I think overall in the industry, the growth is coming from the lower price and -- it is the place where the competition has been there. And if I look at our portfolio, we do have Tommy, which is the major brand for us. But apart from that, the new brands that we have signed as well are probably in the same tier, a few notches above. So what is our strategy? Because -- and if I'm looking at the consumer behavior, I doubt whether they do have a, let's say, aspire or loyalty towards the brand, right? So still pricing is one of the factors which is moving the sales. And in that kind of market, we are launching the brands which are actually more expensive than what we have currently. So some color on the strategy and how do we look at this?

See, as I mentioned earlier, we are a multi-brand portfolio company. So with Aeropostale, with UCB and of course, our own brand vertical, that's where we want to play the value and the mass sort of segment, which is mass and mass premium. That segment is what we want to play. We've still not been able to make any dent in the mass segment, right? So if I talk about, for example, you said the growth is coming from the lower segment. Now if I quote my figures, Tommy Hilfiger for the quarter we've seen a 39% growth. This, again, I'm talking only retail numbers, right? I'm not talking about the consolidated figure. So if I talk about the retail figure, we've grown by 39%. UCB has grown by 30%, whereas Aeropostale, we've actually seen a dip during this quarter. And that's the reason I mentioned in our internal challenges that while H1 Aeropostale is still there is a growth, but the overall figure is way too small. Even in H1, if I look at -- even if you don't consider this quarter, if we look at overall H1, Tommy still has grown at more than 15%, right? And Benetton has grown by almost 6%. So if you see premium also continues to grow. I'm not saying that while there is competition, while there is this thing, but with the rising aspirational income and everything, I think it will be wrong to say that premium today is not growing or can't grow. Yes, the growth at the mass segment is higher. We have not been able to capitalize on that, which we are -- trust me when I say that we are very, very focused, and we are trying to capitalize on that. So hopefully, you will start seeing those results also in the next couple of quarters. We have our strategies in place. Let's see. I'm very hopeful that we'll be able to make a dent over there as well.

Okay. And sir, coming on to the Slide #6 of the presentation, where you have mentioned the internal challenges. It is mentioned that signing with a large e-commerce group, there was some let's say, impact or the anticipation of spillover impact has to be fully materialized. Can you please elaborate on that? What is that? And what are the arrangement with which site are we not currently present on? Or what are we anticipating?

This is on -- you're saying internal challenges, is it?

True, sir.

While the signing with a large e-commerce group for overall brand, this one is what you're talking about, right, this point?

Correct, correct.

So essentially, as I said, Aeropostale was a bet for us. And that bet was also coupled from the fact that Aeropostale is signed with Myntra, okay, for the mother brand. And hence we were very, very hopeful because we are very close partners with Myntra. So we were very hopeful that once the brand -- the mother brand is signed with a close partner of ours and it's a large e-commerce group, they're going to take -- for the overall brand, I think it's going to be a good, and we benefit from that. So you always have to understand in licensing, we are the licensee category, right? We are not the mother category. So we get a lot of rub off from the mother category. So if the mother brand is doing very well, if the mother category is doing very well, we naturally get benefited out of that, right? So now with a giant like Flipkart, Myntra signing Aeropostale, we were very hopeful that we will also get benefited. We've not been able to capitalize on that. However, as I said, we are in process. And hopefully, in the next couple of quarters, we should be able to work this out.

We'll take the next question from the chat from Ashwini Agarwal. Just wanted to know how do you see Superdry and Off-White as a brand, like you used to categorize brand as major and minor brands. Also, you had said earlier about brand positioning like Juicy Couture fit perfectly for premium women handbags category. So in this positioning terms, how do you see Off-White and Superdry?

So Off-White is luxury, it's pure-play luxury play. And I would -- so if I have to categorize it in terms of major brand and investment, I would say that it's not a major brand from a turnover perspective. From a prestige perspective, from all the other perspectives, obviously, Off-White opens a lot of doors for us, right, internationally as well as domestically. But -- from a turnover perspective, it's a luxury brand. I don't foresee that in the next 5 years, it can be a INR 300 crores, INR 500 crore retail brand. But -- so from that perspective, it'll have its restricted this thing. In totality, we have plans of 4 to 5 stores. So it's a niche category, niche experiment. But strategically, I think it is a very, very important brand for us, extremely important brand. And I think in the years to come, I think you -- everybody will start understanding the strategic relevance of having such kind of a brand in your portfolio. With Superdry, I think it's in that premium pricing proposition. And I think it's a beautiful brand. I love the brand. The design philosophy of the brand, it caters to a much younger audience. So in a way, it's very different from Tommy Hilfiger. Tommy Hilfiger is a little more elevated, a little more classic in terms of its designing, whereas Superdry is a very young sort of design sensibility. And considering India is a very young country overall, I think it's going to be -- and it is one of the largest brands in Reliance's portfolio, right? So they're also showing confidence in giving us their single largest brand as a licensing partner, I think it speaks volumes for whatever credibility that we've been able to create for us, right? So we're very, very humbled. We're very excited about this brand. And this, I definitely see a heavyweight brand in our portfolio.

We'll take the next question from [ Samyak Shah ].

So my first question would be what would be the like-for-like growth in this quarter?

This quarter, like-to-like growth is -- so like-to-like growth, actually, we compare only and only in EBO and large format where we have a direct control and access on. So over there also, if you'll see, we've grown in small leather goods and travel put together, if I see, I think we've grown by almost 6.5% in like-to-like. Overall retail sales, if you look at -- and this is -- this I'm not talking only quarter, this I'm talking H1. It's a little distinct to calculate a quarter because of different periods. So [Foreign Language] quarter starts from a particular day to a particular day. Generally, in retail, we don't necessarily look at from that perspective because [Foreign Language] Otherwise, it is always healthy to look at a longer -- at least H1, right? So [Foreign Language] we've grown by 6.5% like-to-like, whereas my overall growth for H1 is an 18% in these channels.

Okay. Okay. And the next question would be what would be the split between trolleys and handbags? If you can just give me some numbers just to get a sense of how the segments have performed. And also how do we see both of these categories moving forward?

So for the quarter, if I see, travel gear is approximately 54% of our overall this thing in which only the luggage, if I talk about, which is trolleys is about 35% of our overall sales. Small leather goods continue to contribute to about 42% and the balance is women handbags.

We'll take the next question from [ Roneet Kapoor ].

Congratulations on the strong revenue growth. So I have a few questions. One of your associate company, I noticed, 7E Wellness is not being consolidated due to cumulative loss. So can you specify what business is there in that associate?