Titan performs well in a disruptive quarter

Indian jewellery and watch brand Titan Company reported a consolidated profit of Rs 18 crore in the first quarter of financial year (FY) 2022. It fell 96.8 percent over the previous quarter as the second wave of coronavirus infections in the country hurt demand and led to temporary store closures.

Even the low profit beat analyst expectations, who were expecting the Tata Group company performance to be disrupted even more. “Impressive performance in a disrupted quarter,” said HSBC Global Research Analyst in a report on August 5, 2021.

“While we started the quarter with strong business momentum, the second wave of the pandemic severely disrupted it,” said C K Venkataraman, Managing Director of Titan Company, in a stock exchange filing.

The company’s sales rebounded towards the end of the quarter despite limited hours and days of store operations after the easing of lockdown restrictions, Titan said in its investor presentation.

“The pace of recovery has been strong, which should increase confidence that Titan can deliver strong growth in FY 2022,” noted the HSBC Global Research report.

Titan had reported a consolidated loss of Rs 297 crore in the same period last year.

Its total revenue during the June-quarter rose 74.2 percent over last year to Rs 3,519 crore. It was “primarily driven by base effect of zero sales in April 2020.” Sequentially, its total income fell 114.6 percent from Rs 7,551 crore.

Here are five takeaways from Titan's Q1-FY 2022 performance:

1. The jewellery segment showed promise. Titan's consolidated revenue from jewellery grew 65.1 percent to Rs 3,050 crore. In the June 2021 quarter, this was the only profitable segment with a consolidated profit of Rs 197 crore. Other segments including eyewear, watches and wearables suffered losses during the quarter. “Thrust on wedding space is bearing fruit with wedding jewellery becoming a critical growth driver,” noted analysts in an August 5, 2021, report by ICICI Direct.

2. “Operating performance was better than expected, led by strong margins,” said Emkay research in a report.  Its jewellery segment margin was 8.4 percent. The company cut costs aggressively during the quarter, with its other costs and advertising costs coming down 37.9 percent and 51.5 percent over the last quarter. “The learnings and experience of the past year helped us navigate this quarter's turbulence much more efficiently,” said Venkataraman.

3. The company is optimistic of strong recovery in the upcoming months due to pent-up demand and an upcoming wedding season. “It expects strong wedding demand and share gains on hallmarking related challenges for smaller players,” said Emkay Research in a report. The Bureau of Indian Standards recently mandated companies to hallmark gold jewellery before selling it.

4. Watch sales were up 285 percent and eye-wear sales were up 123 percent over the same period last year. But they did not report any profit during the quarter.

5. With minimal travel during lockdown, consumers' discretionary spending is more in jewellery. 

Analysts at HSBC Global Research said that the company is well-placed to capture the market as it already hallmarks all of its jewellery and its brand name across the wedding space. “Titan is also building long-term growth options, including carefully choosing its international foray and new business such as Taneira (ethnic wear), which has begun well and could be a large value driver,” they added in the report.