Eyewear shines amid slow sales across board: Titan

A: The quarter was unique. We do not track festival merely, we track sales from Dussehra to Diwali and then the whole quarter. So Dussehra to Diwali sale was not very encouraging. If anything, it was flat or even negative compared to last year across two categories which is watches and jewellery, but the good news and I wouldn’t say whether it is going to sustain or not -- in the neighbourhood of Dussehra and Diwali (beyond the period) -- the quarter itself has performed better. So, the conclusion we are drawing is that this festive season a large number of customer will come for festive buying. This year has been lower but customers for the watch segment have been very discretionary in purchase. In the jewellery segment, they have been coming steadily, and there has been a very small growth in that. So, this is a good news in a bad festive season sale, whereas the eyewear segment, which is utility in a way, has seen a consistent growth.

However, we have seen three different trajectories. Completely discretionary item like watches has struggled for growth; jewellery because of many ups and downs-- down in the price -- in April-May-June people advance purchases; and then the regulatory issues. The growth has been sluggish. So, that is an investment and adornment sentiment but eyewear is strongly driven by value. Consumers are looking for value. If a product is useful they go for it. Mobile phones follow a different trend.

Q: What about the watches business, what kind of a growth are you expecting going ahead as you have been seeing sluggish growth in that segment. Even in the quarter gone by it impacted your margins?

A: We had a decline in the first six months and in comparison to that we have seen a better performance in Q3. When I said nothing to write home about there was actually something to write home about because there had been an extraordinary dip during Dussehra to Diwali but outside that we had seen marginal growth. Having said that the watch category is highly discretionary. We have seen very different performances. Our mass market brand has done well. Fastrack has done reasonably well, but not at the level of growth that we used to see. The Titan brand has faced difficulties in growth and we have taken prices up and so on, there are various reasons but I do not want to talk about them. The essence is that the category has faced some headwinds in terms of consumer demand. Jewellery is different. So, if you want to talk about watches, all I can say is innovation and product introduction continues.

Store opening, although in a calibrated manner, continues and we are seeing the result of that. The company has been investing in new categories. We launched fragrances, Skin, we launched Fastrack helmets. People do spend in these categories if they find the product new and useful.

Q: What is the connection between jewellery sales and gold prices? Is it that the loss of gold as an investment last to some extent because it is the underperforming asset class in 2013 have any bearing in sales, and therefore I am asking you because if gold continues to under perform as an asset class, will 2014 also see jewellery sales struggle?

A: We have not been able to see any significant connection between gold price and jewellery sales. Certainly when gold price dropped two years back, it dropped in August, there was a huge surge of demand and volume picked up; volume and value picked up. We are certainly seeing that if there is a secular trend, if there is a general expectation that gold prices are going to rise, jewellery demand certainly picks up but this year you have seen gold prices have dropped internationally. The prices dropped significantly in the May-June-July period and sales went through the roof and then regulation came in and there was an increase in customs duty and it went up to 10 percent. So, Indian prices are no longer attractive.

Q: I want to talk about debt situation because in the quarter gone by in the conference call you mentioned that your debt will increase going ahead. From current Rs 950 crore levels, how much do you think the debt could increase in 2014?

A: Not significantly. It is only a temporary period because of change in regulation of gold on lease that we had to have bridging during the year. It will go up marginally but by March, perhaps April-May, we will stabilise a little over the current level.

Q: Do you see any green shoots. You did speak about a marginal improvement in some segments post Dussehra and Diwali. Do you see it continuing? What are you channel checks telling you?

A: There are two things. One is we do see some marginal growth – I am talking about the non-festive season. This is a peak wedding time in urban India when we see a lot of spending on wedding. In addition, agricultural income that has come to the market and it is beginning to show, but these are not dramatic changes. However, this year anything positive seems dramatic relatively speaking. How sustainable it is, that is the question.

The second, certainly companies like us should continue to invest in generating demand which is wooing consumers to our kinds of products, innovating on products, continuing to introduce categories of growth will come out of expanding distribution, expanding the product mix, expanding the price points and getting into new categories, which is what we are doing. Therefore, yes it is a night watchman kind of period, you play out the last few over as far as financial year is concerned but that is not what companies are meant to do; you have to look at everything strategically so when it comes to investing in brands, for example we are not holding that, when it comes to investing sensibly in network expansion, we are not holding back.

In fact we have invested in setting up two plant both for precision engineering and watches and that will come in handy next year and the year after in terms of cost. So, this is a temporary period. The wedding season next year is expected to be better than the last year so I am very optimistic but we may not get back to the growth of 20-25 percent very fast.