Pent-up demand, consumer shift to organised segment helping growth: Kalyan Jewellers

The movement of consumers from unorganised to organised segment and pent-up demand helped Kalyan Jewellers clock 61 percent revenue growth during the second quarter ended September, said Ramesh Kalyanaraman, Executive Director, Kalyan Jewellers India. According to Kalyanaraman, the company also took several initiatives during the month which helped it tap better the consumers moving away from the unorganised segment.

“We introduced staple products, with more gold content in it as consumers in the organised segment do not want to spend on jewellery. We also increased the inventory of staple products and this helped us bring these consumers to mid-margin products from low-margin products,” he added.

The company marketing campaigns focussed on highlighting the safety and hygiene within the stores also helped the growth during the quarter.

The gold jewellery market has witnessed of late a shift of consumers to the organised segment from the unorganised segment on account of new gold hallmarking rules by the government. Most players in the organised segment including Titan Company which owns Tanishq and Kalyan Jewellers are seen to be benefitting out of this trend.

“We believe implementation of jewellery hallmarking can further accelerate formalisation,” ICICI Securities said in a note in October.

“Jewellery hallmarking may likely lead to: further industry consolidation (apart from formalisation), likely traceability of raw material (gold) leading to potentially higher imports through formal route, material business disruption for informal players in converting their inventory to hallmarked standards (necessity to melt and recreate ornaments), opportunity for design-oriented brands to realise higher brand premium and higher industry-wide efforts to drive premiumisation,” it added.

Q2 shines

Kalyan Jewellers posted a 61 percent year-on-year (YoY) jump in its consolidated revenue for the second quarter (Q2) to Rs 2,889 crore as compared to Rs 1798 crore reported in the year-ago period. The company’s consolidated net profit during the period stood at Rs 69 crore as compared to a loss of Rs 136 crore in the second quarter of FY21. Total standalone revenue for the company in India, for the recently concluded quarter was Rs 2,503 crore, as against Rs1,556 crore for the same period in the previous year.

“This was despite the fact that there were lockdown related disruptions in showroom operations during the recently concluded quarter in one of our key markets - Kerala. Showrooms in Kerala resumed full operations only by the second week of August,” the company said in a press note.

The same-store sales growth (SSSG) in non-south markets was 72 percent as compared to the southern markets, which had an SSSG of 44 percent. This differential was predominantly due to COVID-19 related closures of showrooms in Kerala during the recently concluded quarter, the company said. The overall SSSG in India during the quarter was 52 percent.

The India operations recorded earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 201 crore for the quarter compared to Rs.147 crore in the same quarter of the previous year.

In the Middle East, Kalyan Jewellers saw revenue growth of 61 percent as compared to the same quarter during the prior year. Total revenue from the Middle East operations for the recently concluded quarter was Rs 360 crore as against Rs 224 crore for the same period in the previous year. The growth was largely same-store sales driven since it did not add any new showrooms in the region during the last 12 months. The Middle East region contributed about 12 percent to the overall consolidated revenue of the company.

The Middle East operations recorded earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 26 crore for the quarter compared to a loss of Rs 132 crore in the same quarter of the previous year. Net profit for the quarter was Rs 35 lakh as against a loss of Rs 165 crore in Q2FY21.

According to the company, the e-commerce division Candere continued its growth momentum in Q2. The revenue for the recently concluded quarter was Rs 32 crore versus Rs 22 crore in Q2-FY21, a growth of 47 percent. The company recorded net profit of Rs.54 lakh compared to a net profit of Rs 1 crore for the same period of the last financial year.

Outlook ahead

While the company expects the growth momentum to continue in the quarters ahead, the numbers will be a bit subdued in comparison to Q2 given the high base of third quarter last year.

“We are seeing better footfalls and sales in comparison to the festive season last year and we expect this growth momentum to sustain; however, we have to keep in view the high double-digit growth that we had seen last year,” he said.