Titan management: Demand pressure in economy price points exists, need to ramp up eyewear biz

After posting a strong set of Q2FY23 numbers, Titan’s earnings concall began on a rather sombre note as managing director CK Venkatraman acknowledged the absence of late veteran investor Rakesh Jhunjhunwala.

“We all miss Rakesh. He was a constant source of support and encouragement for all these years,” he said. Titan was the top holding in RJ’s portfolio.

The jewellery and watchmaker on November 4 reported year-on-year growth of 33 percent in its standalone profit after tax at Rs 857 crore for the September quarter, higher than analysts' expectations of Rs 713 crore.

“We remain positive on the medium-term outlook,” said the top boss, adding that the first store in the United States will come up as soon as the permissions are worked out.

However, while demand is strong in higher price points, it continues to remain sluggish in the economy-oriented price points, said the management. Economy pricing is a strategy where products have lower prices due to low production costs.

“This is because different segments of the population have been hit by inflation differently,” the management said.

In the jewellery business, the company saw demand pressure in the sub-Rs 50,000 and sub-Rs 1 lakh categories. Similarly, in the watches and wearables business, which grew 21 percent YoY, demand in higher-priced products was stronger compared to the lower-priced ones.

In terms of wedding demand in the jewellery segment, Titan’s top brass said that early signs were not clear yet, but they are hopeful of a strong season.

The company managed to post an EBIT margin of 15.3 percent in the jewellery segment, however, the management said it is not sustainable and they would like to maintain their earlier 12-13 percent guidance and not revise it upwards.

Eyewear business

The segment registered only 4 percent jump, while other businesses saw double-digit growth. “In July, we saw good demand but there was sluggishness in August and September. In H2FY23, we will be investing a lot more in advertising to drive customer acquisition and store expansion,” said the management.

The eyewear business has the highest EBIT margin among all businesses. In Q2FY23, it posted an EBIT margin of 16.5 percent while jewellery division’s EBIT margin came in at 15.3 percent and watches & wearables at 14.8 percent.

“We have seen a good bounce back in demand after Diwali. We are positive about Q3FY23,” the management added.