Go Fashion (India) Ltd (NSE: GOCOLORS) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Gautam Saraogi — Chief Executive Officer
R. Mohan — Chief Financial Officer
Analysts:
Rahul Agarwal — Analyst
Prakash Kapadia — Analyst
Ankit Kedia — Analyst
Devanshu Bansal — Analyst
Sameer Gupta — Analyst
Gaurav Jogani — Analyst
Prerna Jhunjhunwala — Analyst
Sourav Mondal — Analyst
Abhishek Bhudolia — Analyst
Akhil Parekh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Go Fashion India Limited Q2 and H1 FY ’25 Earnings Conference Call.
This conference may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] I now hand the conference over to Mr. Gautam Saraogi, CEO of Go Fashion India Limited. Thank you, and over to you, sir.
Gautam Saraogi — Chief Executive Officer
Yeah. Thank you. Good evening, and a warm welcome to everyone present on the call. I have along with me Mr. R. Mohan, our Chief Financial Officer and SGA, our Investor Relations Advisors. I hope you have all received the Investor Deck by now. For those who have not, you can view them on the stock exchange and the company website.
I’m happy to share that we have successfully sustained our growth momentum despite the ongoing challenges in the apparel retail sector. In H1 FY ’25, our revenue reached INR429 crores, a growth of 13% on a Y-o-Y basis. Our EBITDA stood at INR136 crores, a growth of 12% despite a softer demand environment, our EBITDA margins have roughly stayed in-line and stood at 32%. This is due to the improved product mix and high focus on maintaining operational and cost efficiency.
Our full price sales accounted for 95% with an average selling price of INR759 for H1. Unfortunately, we made an error in the investor presentation. We have mentioned at INR742. INR742 is actually the average selling price for quarter two. For full H1, the average selling price is INR759. In a challenging demand environment, this underscores strong customer loyalty and acceptance of our products and its pricing. Our brand’s ability to not only rely on discounting sets us apart from our peers. Our unique product offering combined with quality and competitive pricing positions us favorably in the industry.
As demand begins to normalize, we expect the mass premium segment to lead in terms of growth. From our internal study, this quarter, we discovered an important insight, which indicated that sales were shifting from the smaller stores to the larger stores as the very small stores cannot accommodate a full collection. In response, we made a strategic decision to not renew the leases of these very small stores due to which we have closed 13 stores. In these 13 stores, about 9 to 10 stores are pertaining to these very, very small stores, which are probably lower than 200 square feet. Over the past next two quarters, we see ourselves closing 15 to 20 stores of this manner.
We are confident that sales from the smaller stores will transition to a larger stores in-line with this approach. In H1 FY ’25, we opened 54 new stores on a gross basis and on a full-year basis, on a full six months H1, we opened 41 stores at a net level. On a full-year basis, we aim to open 120 to 150 stores on a gross level and look to open about 100 stores at the net-level. Our A&P spend as a percentage stood at 2%, which is in line with our previous commentary.
Coming to working capital and cash flows, we at Go Fashion strongly believe in sustainable growth backed by cash flows. Against the backdrop, we achieved a strong pre-Ind AS operating cash flow of INR55 crores in September 2024. This was due to strong focus on inventory and supply chain efficiency. Going forward, we aim to convert 50% of — more than 50% of our EBITDA into pre-Ind AS operating cash flows.
On the inventory front, we have maintained a focus on efficient inventory management, which has led to a further reduction in our warehouse inventory level. As a result, our inventory days have decreased from 104 days in March 2024 to 97 days in September 2024, showing a 17-day reduction. As we approach the festive season, we are witnessing encouraging improvements in footfall across our local store fueled by growing improving customer sentiment. We with our wide selection of bottom wear, we are confident in our ability to capitalize the momentum and anticipate a strong recovery in SSSG and improvement in our P&L heightened.
On way forward, our first step is to achieve low-single-digit SCSG forward, which we are on track towards. Secondly, we would grow our footprint by increasing the number of stores in our portfolio. Lastly, we continue to focus on inventory optimization where it can be done to further improve our balance sheet. We expect our inventory to remain in the range of 90 days to 95 days by March 2024.
To conclude, although retail demand in India is currently looking subdued, we expect it to pick up in the coming months. Several factors support in this outlook, including the festive season ahead that typically boosts consumer spending, a gradual recovery in economic conditions and a return to social events and biddings. Additionally, improving consumer sentiments and increased urban mobility are likely to drive footfalls in retail stores. These factors combined make us optimistic about a rebound in demand as we move forward.
With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for the update on Q2 and H1 ’25 results and financials. Thank you.
R. Mohan — Chief Financial Officer
Thank you, Gautam, and good evening, everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First, I’ll give you financial highlights for Q2 FY ’25. Our revenues for the quarter stood at INR209 crores as against INR189 crores in Q2 FY ’24, a growth of 10% Y-o-Y. Gross profit stood at INR132 crores, a growth of 15% Y-o-Y with a GP margin of 63.1% for the quarter. Our EBITDA for the quarter stood at INR64 crores as compared to INR57 crores in Q2 FY ’24, a growth of 12% Y-o-Y. Our EBITDA margin stood at 30.5%. Profit after tax for the quarter stood at INR21 crores and witnessed a growth of 3% Y-o-Y. PAT margin stood at 9.9%.
Coming to the H1 FY ’25 performance. Revenues stood at INR429 crores in H1 FY ’25 as against INR379 crores in H1 FY ’24, a growth of 13% Y-o-Y. Gross profit stood at INR268 crores, a growth of 16% Y-o-Y with GP margins of 62.4% for the half year. EBITDA for H1 FY ’25 stood at INR136 crores as compared to this INR121 crores in H1 FY ’24, a growth of 12% Y-o-Y. Our EBITDA margin stood at 31.7%. PAT for H1 FY ’25 stood at INR49 crores as compared to INR46 crores in H1 FY ’24, a growth of 6% Y-o-Y. Our PAT margin stood at 11.5%. ROCE and ROE, excluding Ind AS impact as on FY ’24 stood at 20.7% and 16% respectively. Cash and cash equivalents stood at INR238 crores as on 30 September 2024.
With this, we will now open the floor for question-and-answer.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Rahul Agarwal
Yeah, hi, very good evening, and thank you for the opportunity. Firstly, just a clarification, you said 50% of EBITDA conversion into cash flow going forward pre-Ind AS, is that correct?
Gautam Saraogi
Yes, correct. Pre-Ind AS EBITDA into pre-Ind AS operating cash flow.
Rahul Agarwal
Okay. Perfect. And so, EBITDA is after tax, right?
Gautam Saraogi
No, EBITDA is before tax. It’s before depreciation, interest and tax. On an operating cash — pre-Ind AS operating cash flow after tax payment.
Rahul Agarwal
Yeah, that’s what. Sure. I get it.
Gautam Saraogi
Yeah, it is after tax, yes, absolutely. Yeah.
Rahul Agarwal
Okay. Secondly, you know, just wanted to get some sense around this entire consumer demand, right, I mean the contradictory feedback across lot of consumer products we are getting this quarter, maybe urban is slowing down, rural doing better, some pockets do better than the other around India. Just in your experience, how have you seen demand flowing through for your products across India regionally, pricing-wise, new products where is the demand shifting really? Any color on demand and competition will be really helpful.
Gautam Saraogi
Yeah, thanks, Rahul. So see, demand has been very slow around that. I mean, honestly, we’ve not seen any real improvement. In fact, in July, August, we have seen decent improvement in demand. In fact, we were having a single-digit SSSG also by September first week. But unfortunately, September was a very weak month with slight early Shradh as well. And you know the entire SCSG what we had in the first week of September just kind of became flat by September end. So the demand has been a little slow. As far as regions are concerned, see, I mean, look, majority of our network are present in urban locations. So we have not seen a very big outlier urban versus rural, but if I take from a geography perspective South has been a little slower than usual, otherwise West, North and East has been pretty much steady. South has been a little slow.
Rahul Agarwal
And what would you expect in your internal analysis going forward into next four months, because it’s very critical for these festival days actually to turn out better. So any sense on that?
Gautam Saraogi
See, we are working towards a 15% to 20% growth. See, currently, first quarter we delivered a 15 % growth. This time we have delivered a 10% growth. So on a H1 basis, we have delivered about 13% growth. So moving forward, our company aspiration is going to be that we want to achieve growth between 15% to 20%.
Rahul Agarwal
Got it. Thirdly, I saw an announcement about Mr. Vijay Srinivas getting appointed as a Head of MBO Sales. Any thoughts around this, as in is the company really planning something big here? Because I thought that was not a focus area.
Gautam Saraogi
See, look, rightly where you said our focus area is to do LFS and online more towards the online stream. But when we look around, a lot of brands have been doing really well in MBO. Many of the modern trade stores, the family stores across regions have graduated and they’ve become a lot organized where our presence is very weak. So we feel if we do selectively MBO well in these family stores, in these local family stores, right, I think there is a huge potential. So I think that business over a period of time can become a small channel. Right now, we are doing about INR6 crores a year, which is next to nothing. So our idea would be to build it into a decent channel in the coming years. But doing it selectively, see, our idea is not to go bundle and go very big in MBO because there are many risks in that business like discounting. So we want to do it in a very calculated manner. I would put it that way.
Rahul Agarwal
So let’s say INR50 crore business in like three years out, is that what we’re doing or we’re going to be very sharp?
Gautam Saraogi
No, very difficult to estimate right now, Rahul. I think, look, right now, we’ve just appointed a Head. So probably over the next couple of quarters, we’ll get a sense of a business plan what will come out from the business.
Rahul Agarwal
Got it. And just one, just the background of Mr. Srinivas, so you mentioned the industry in the press release, but what was he doing previously?
Gautam Saraogi
He was into FMCG, and he’s worked earlier in many FMCG companies and he has a very good experience in this MBO and distribution business. He has earlier worked in TTK, and he also worked on as well. So he is very familiar with FMCG and general trade.
Rahul Agarwal
Got it. And lastly, just on the stock pledge, any update from the family side as in what’s really happening around that right now?
Gautam Saraogi
Right now, Rahul, no update here. I mean, honestly, we wanted to clear the pledge by December is what we had committed to everyone, but as of now, we don’t have an update. We are working on it. The pledge is absolutely safe. There is no risk on the pledge. I would like to reconfirm that. The pledge is absolutely safe. But from a timeline’s perspective, I’m unable to give a guidance, unfortunately.
Rahul Agarwal
Sure. So essentially what we should expect is even that gets delayed or whatever happens like by March, we should at least expect the pledge to go down to zero, right, then that much we can expect.
Gautam Saraogi
March, see, I’m unable to commit March. I’ll tell you the reason why I don’t want to tell March because every time I’ve given a timeline in the past, we’ve not met the timelines. So for me, giving a timeline right now is very difficult, but I can rest assure you on one thing, it’s on the top priority of the family to clear this at the earliest.
Rahul Agarwal
Okay. Perfect. All right. Thank you so much for answering my questions and have a great Diwali.
Gautam Saraogi
Thank you and wish you the same, Rahul. Thank you.
Operator
Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Thank you. The next question is from the line of Prakash Kapadia from Spark PMS. Please go ahead.
Prakash Kapadia
Yeah. Hi. A couple of questions from my end. You know, Gautam, we were very hopeful of that 4% to 5% SSG. And now if we look at some of the other consumer businesses, commentary has not been positive. So are we still hopeful, confident of H2 being far, far better and upcoming season would get us there? What has been the volume growth in Q2? And I think we have been alluding we’ll open around 120, 125 EBOs. So how much have we opened in the first half? And what would be the capex for that? And in case we see maybe muted demand continuing, would that continue or would you reduce the EBO expansion? Those are my questions. Sure. Thanks.
Gautam Saraogi
Thank you. Thank you, Prakash. So I think Prakash, we have a very — I also just mentioned earlier that we were very optimistic in the middle of Q2. But unfortunately, September was quite a low month and the low-single digit SSG what we had of 4%, 3% – 4% to 3% in the beginning of September just flattened out by the end of September. So it’s unfortunate that September was weak. But look, we are very positive. I mean, look, what I’ve been hearing around, you know, is that many brands are saying that this festive is going to be a good festive. So I’m very optimistic and we are going to be looking at targeting a growth of 15% to 20% on an overall basis. And I think hopefully H2 should be better than H1. I don’t see any reason why it shouldn’t. And I think the mood among brands has been very positive. So I think we are working towards a growth of more than 15%.
As far as SSGs are concerned, so for Q2, our SSG was 0.54%. On a volume basis, it was minus 0.6% and for H1, our SSG was 0.46% and on a volume basis, it was minus 0.59%. As far as store openings are concerned, on a net basis, we have opened about 41 stores in H1, and we have fallen short of the guidance what we have given on a net basis. Actually, what has happened in Q2, we’ve realized, see, as our product collection has increased, our average store size is around between 300 and 500. In our network of stores, there are still some stores which are very small. Some stores might be 150 square feet, 190 square feet and those stores are not able to accommodate the range what a 300 or 400 square feet store can take.
And what we realized that many of the customers, when we did a small research among customers, many of the customers are finding it very difficult to shop and they are organically migrating to a larger store in the same market. And because some of these smaller store leases were coming to an end, in Q2, we decided not to renew them because we didn’t want to get into a future commitment in the stores again. So we have shut about 10 stores in Q2 pertaining to size. So on a net basis, we’ve added 41. In H2, we are targeting to open about 60 odd stores on a net basis. And on a gross basis, we are going to try adding about 80 stores. So on a net basis, we will be at around 100 stores net for the full financial year against the original guidance of 120 to 150. So we have fallen short on that. But right now, we are quite confident that we’ll get to about 100 stores on a net basis by March.
Prakash Kapadia
Okay. Okay. And then what would be the capex if you could just quantify?
Gautam Saraogi
See, it will be anywhere in the range of between INR25 crore and INR30 crores. But since we are generating a healthy — no, INR22 crores, it will be around the range of INR20 crores to INR25 crores. Since we are generating healthy operating cash flows in the line of more than INR50 crores, I don’t think.
Operator
I’m sorry to interrupt, but can you please rejoin the question queue for a follow-up question?
Gautam Saraogi
So since our operating cash-flow is more than INR50 crores, it is INR55 crores for H1, I think capex will be well supported by the cash, OCF that we generate.
Prakash Kapadia
Okay. Okay. Understood. Understood.
Operator
Thank you very much. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Ankit Kedia
Yeah, sir, first question is on the LFS category. We have seen a strong growth this quarter as well on a very, very strong base of Q1, but your receivable days have also increased. And if I look at Reliance, which is 90% of your business, they are under pressure from their results. So what’s happening on the LFS front and how much of the inventory we have pushed for the festive, because receivable days have increased.
Gautam Saraogi
So Ankit, I think receivable days are a little increased because we’ve added more number of stores in H1, and because we have added a good number of new stores, the sales in those counters would not have really reflected, but we placed the inventory which is better in our book. So I think because of that slightly inventory would be higher. As far as festive is concerned, we have not done a lot of festive stock coming at the LFS end. I think the kind of base stocks what we maintain at an LFS level, I think has been pretty decent, which we should take care of. So we’ve not done any large number of dispatches as far as festive season are concerned for quarter three. As far as Reliance Retail and other LFS is concerned, I think if I take average out of Q1 and Q2, I think the performance of Reliance Retail and overall LFS for — if I look at it from an H1 performance is pretty decent. And we are expecting good decent performance in H2 as well.
Ankit Kedia
Sure. My second question is on your store closure. While this year you will be closing around 35, 40 stores of the smaller size, can we expect next year also some store closures to come in the same proportion or this will be it.
Gautam Saraogi
Well, maybe another 10, 15, maybe another 10 stores next year, but I don’t — see, I’ll tell you what has happened. We covered majority of the stores this year, the very small stores. Even if it happens next year in the low-single digit, maybe four, five stores. But it’s not going to be as big as this number.
Ankit Kedia
So can we expect 130, 140 store addition next year on a gross basis?
Gautam Saraogi
Absolutely. Yes, absolutely. No, in fact, I think on next year, I don’t see too much of net — we don’t see too much of store closures. So on a net basis, we see ourselves adding at 120 plus stores next year for sure.
Ankit Kedia
Sure. My last question is on the A&P spend. While the first half we have done 2% spends and you alluded that the second half could be better off as the demand comes in and you’re hopeful that the demand will come in. So can we expect the higher A&P spends in second half?
Gautam Saraogi
Not really, Ankit, because see usually A&P spends are accelerated just before festive, we’ve kept our A&P spends in check because the overall environment is very weak. So in a very weak environment when you spend too much on advertising, it does not really affect your performance too much. So we will be maintaining the same hygiene level of 2% spend even in H2. So marketing spend as a percentage of revenue will not change.
Ankit Kedia
Sure. And if I can just squeeze in one more question on gross margins. We have seen strong gross margin expansion in the quarter. Is it a one-off or we are seeing the low-cost inventory now really hit the system and we can expect this trajectory to continue for next three, four quarters?
Gautam Saraogi
Well, Ankit, it’s a combination of two things. One is, obviously the lower-cost inventory, that is one reason. The other reason is that there are certain products — see, usually all our products carry the same value. But there are some products which are slightly having a higher GM and those products have done very well in Q2 and that is why you’ve seen a very strong GM of 63.1%. So I think on a steady-state basis, Ankit, you can expect a GM of about 61% to 62%. It will range in that bracket.
Ankit Kedia
That’s helpful. Thank you so much, Gautam, and Happy Diwali to you and the team.
Gautam Saraogi
Yeah, we wish you the same Ankit. Thank you.
Operator
Thank you very much. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Devanshu Bansal
Yes, hi, sir. Thanks for taking my question. Just a small follow-up on the previous question, which are those products that have done well for us, definitely, can you just follow out which have higher gross margin.
Gautam Saraogi
See, there are some — there are a few products in the pants category and there are some few products in the jeggings category, which has slightly higher gross margin and because of which it is reflecting in our GM.
Devanshu Bansal
Understood. And any new innovations that we have done for the upcoming festive, wedding season, any interesting new launches that we have done?
Gautam Saraogi
See, we are continuing to strengthen our pants and jeggings category and I think look some few product additions we keep doing here, but we have not done anything really or we have not really come up with any special range, like how we had come up with an athleisure range earlier last year, there’s no special range which has come out for festive, but we continue to strengthen our pants and jeggings portfolio by coming up with new colors and some new products as well.
Devanshu Bansal
Understand. Gautam, second, you are indicating that focus is on relatively larger stores, 350, 400 square feet. I guess just wanted to check on store productivity perspective, these stores will be having higher productivity, right, versus the earlier smaller stores that we are closing now.
Gautam Saraogi
In recent times, I’ve definitely seen that the 300, 400 square feet stores do better because from a shopping experience perspective, customers just prefer shopping in a slightly larger store because our color range and our product depth also has increased. The very small stores really don’t — are not really working very well. See, there are some stores which are continuing to do well. What we have done is we have taken a call in those stores where we — those markets where we have a slightly bigger store and a smaller store, we have shut the smaller store. That does not mean completely our small store network will go away. That’s not going to be the case. So wherever we feel that by shutting the smaller store, the sale will move to another store in the same cluster, we have done it on that basis. So eventually, we don’t see a loss of sale by shutting these stores, that we have done this quarter.
Devanshu Bansal
Understood. Just a small follow-up here, so that 20,000.
Operator
I’m sorry sir, but can you please rejoin the question queue for a follow-up question.
Devanshu Bansal
Sure.
Operator
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Sameer Gupta
Hi, good evening and thanks for taking my question. Most of them have been answered. So just wanted to ask this, on the soft demand environment and challenging environment for the apparel retail that you mentioned in the opening comments, now a segment of the market, which is value fashion, whatever data we have indicates that they are doing well. So I just wanted to understand how are you concluding that it is an overall demand environment which is soft, and we are not losing any share to, let’s say, the other organized players? And the confidence that the festive will revive this, where is this coming from?
Gautam Saraogi
See, so Sameer, I think we are operating in the mass premium range, value retail might be doing well, but from a mass premium segment, things have been slow for quite some time. And I think from a category perspective, the mass premium category is something we’ve always targeted. And I think when I speak to the other retailers and all, the retailers are having a positive mindset that this year festive might be good. So that narration is probably coming from there. So we are quite optimistic that this time Diwali and post-November with Christmas and New Year also we’ll do a good number. So the narration on the slowdown was more from a mass premium segment. Yes, pockets of value retail are definitely doing well. Our customer is a mass premium customer, so a value retail customer will not really eat into our tools as such.
Sameer Gupta
Just a follow-up here Gautam. So one.
Operator
Sorry to interrupt sir, but can you please rejoin the question queue?
Sameer Gupta
Ma’am, it’s a follow-up on the same questions, ma’am.
Operator
Okay, sir, go ahead.
Sameer Gupta
So sir, Gautam I just wanted to understand this. So mass premium is doing slow. First of all, how do we conclude this that it’s the overall market, which is a problem and not only some of, you know, Go Fashion or some other retailers? And second is that like are we sure that the consumers are now downtrading to the more value retailers kind of a thing?
Gautam Saraogi
See in retail, Sameer, there is a premium segment, there is a mass premium segment and there is a value segment, right? And there is a customer for each of these three segments. When I evaluate the other brands in the industry, everyone has been complaining of about a little bit of slowdown. Of course, there are some exceptions there, and that’s always going to be the case. But when I speak to most retailers, the sentiment and the commentary is very similar. So I’m somewhere driving that conclusion from what little bit of research and the chat what I’ve been having with the other folks.
Sameer Gupta
Got it. And downtrading question?
Gautam Saraogi
See on the downtrading question, see for the kind of product we have, we are priced at the bottom of the pyramid. So I don’t see value retail eating into our share. The customer who wears the kind of product we give, they will definitely come back to Go Colors brand, or any other brand in the mass premium segment is they have a similar product offer.
Sameer Gupta
Sorry, you mentioned that you cater to the bottom of the pyramid, didn’t get that, sorry.
Gautam Saraogi
The bottom of the pyramid, as far as mass premium is concerned, see for the kind of product offering we have in terms of specs, our pricing is the lowest, is one of the lowest. So I think for the kind of value offering what we are giving, I don’t think value in retail should eat into our share. I don’t see that happening.
Sameer Gupta
Got it, Gautam. Thanks. I’ll come back for any follow-ups.
Gautam Saraogi
Sure. Thank you, Sameer.
Operator
Thank you very much. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Gaurav Jogani
Yeah. Thank you for taking my question. My question was regards to the inventory bit. You alluded in your opening remarks something on the — why the inventory was down. I didn’t really catch it. If you can just repeat it if you don’t mind.
Gautam Saraogi
No, no, see, actually Gaurav, historically we were carrying very high inventory in the books in terms of number of days. So over a period of time, we have rationalized inventory. So we had about, if I’m not wrong, we had about 120 days of something of inventory earlier and we have brought it down to 97 days. In Q1, we had 87 days of inventory and now we have about 97 days. Obviously, inventory days have slightly gone up from Q1 because we are entering the festive season. So we’re carrying slightly higher inventory. On a steady-state basis, we see ourselves carrying inventory anywhere between 90 and 95 days. So compared to earlier quarters and years, we’ve rationalized our inventory a lot.
Gaurav Jogani
Sir, thank you. And the next question is with regards to the overall — again, the demand bit only, but it’s more on the regional side. I think the data that suggests most of these sales is coming from the Southern part of India. So are you seeing — and the store opening is also in that region itself. So any particular reason of opening more stores in the Southern part of India and not the other parts of India? Anything that you can allude on this front.
Gautam Saraogi
See, our expansion strategy has not really too much to do with how a region is particularly doing in a particular period, right? See, for us, if a city has a potential where we feel can — where we can have multiple stores and the city from a consumption perspective, we’re going to be open in that city, regardless, if that region is weak or not. So I think our city selection has nothing to do with current trends. We go on the basis of size of city and then we decide.
Gaurav Jogani
No, the question was because you know we have been seeing that you said that the Northwest and the East part has been relatively stable versus the South, which has been a bit slower, and hence wouldn’t it be more prudent sense that the demand conditions there are more steady to open more stores there.
Gautam Saraogi
No, we are trying to, definitely North and East is definitely one of our focus areas. And because the base is weak, because the base is low there, our growth rates also have been very encouraging. So we are opening in North and East, but at the same time, when we are getting very good store options and opportunities in the South, I think it’s a good time to take it because when demand picks up, then we’ll end-up having a good location also in these markets.
Gaurav Jogani
Thanks. That’s all from me.
Gautam Saraogi
Thank you, Gaurav.
Operator
Thank you very much. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Prerna Jhunjhunwala
Hi, thank you for the opportunity. The first question is on ASP decline. What is leading to that ASP decline in the first half?
Gautam Saraogi
Actually, Prerna, there is a correction. I mentioned in my opening remarks, in the investor presentation, we actually by mistake showed only the Q2’s ASP. The blended ASP for H1 is INR750. So there’s actually a 1% increase in ASP on a Y-o-Y basis.
Prerna Jhunjhunwala
Okay. I missed that. I joined in a little late, okay. And sorry, I missed the number again.
Gautam Saraogi
INR759. It’s INR759.
Prerna Jhunjhunwala
Okay, INR759. Okay. Now that makes sense now because I was worried on.
Gautam Saraogi
We ended up noticing last minute. Sorry, apologies for the mistake.
Prerna Jhunjhunwala
No problem, no problem. I also missed the opening remarks. So second question is, where is the demand is better in terms of categories and where are we faring well? You mentioned jeggings and pants, but what about the core category of ethnic wear and how do you compare it with your western wear portfolio?
Gautam Saraogi
No, see, our core has been very well. So we have not seen any real decline or anything in our core categories. Core categories like leggings and Churidars has been our historical product and really continuing to do well. Just as a company because the sales over a period of time have started shifting more towards the specialty bottom like pants and jeggings, our focus also is more on those kind of all product segments. But as such our other categories like leggings and Churidars, we’ve not seen any as such decline.
Prerna Jhunjhunwala
Okay. Okay. One more question if I may. Just wanted to understand on how is the SSG, what is the kind of SSG that you’re building in for this 15%, 20% growth that you are looking in, I mean, what are your expectations with respect to the festive season? And generally, we see some demand contraction also after festive season. So how could this be?
Gautam Saraogi
See, without being very, very over aspirational, I think, see, we are working towards a 15%, 20% number with the medium — low-to-mid single-digit SSSG. So I think we are working towards that. So we are hopeful that we’ll be able to achieve that in the coming quarters.
Prerna Jhunjhunwala
Thank you, Gautam. All the best.
Gautam Saraogi
Thank you. Thank you, Prerna.
Operator
Thank you very much. The next question is from the line of Sourav Mondal from RK Advisory. Please go ahead.
Sourav Mondal
So my first question is on your application. I’ve seen that in Play Store and the rating is very low. I think it’s around two stars. And most of the problem says that they have a problem with logging in or making accounts. So can you tell me why is that?
Gautam Saraogi
Yeah Sourav, actually what happened, we’ve not really launched our application officially yet. We had actually launched that application more from an internal training perspective, but because it was on Play Store, many customers downloaded as well. So we’ve actually not officially launched it yet. Over a period of next few months, we are going to be launching our apps.
Sourav Mondal
Okay, that’s answered the question. Now my second question is, how do you do the omnichannel sales exactly like when the customer is in the store and then they did not find the right thing or right color and you take the number or email, and you do messaging or give them an email or how?
Gautam Saraogi
So typically, what happens Sourav, so I first start with the online part. In the online aspect, when a customer places an order, the closest store in that region will deliver the product. So our aspiration is, okay, if a customer is making an order, then do a local delivery using your network and can we deliver it within 24 to 48 hours, is our target. That is as far as website is concerned. As far as store is concerned, see, since we carry so much of inventory at a store level, the likelihood of a customer not finding their color and size is usually little less. But in that cases sometimes we try converting that customer into an online customer. So then and there we have a tablet, we convert that customer into an online customer and then the closest store in that particular region will dispatch. So these kind of omnichannel initiatives that we are doing currently.
Sourav Mondal
Okay. My third question is, our products are competitively priced, and widely, I think including in smaller cities across various regions. Given this, could you clarify where there isn’t a greater focus on expanding beyond your existing cluster and region? I know you are opening stores beyond your cluster, but you know, why not leave cluster and go beyond the cities where you are not present.
Gautam Saraogi
No, we were going now in fact, we are actually doing that now. We are trying to go beyond our clusters and open stores in new cities and that is something which is one of our key focus areas. And we will see a lot of that in the coming quarters. But I think even if we do that, I don’t think our ratio of you know our top 10 cities and the Tier 2, Tier 3 cities, I don’t think that ratio really changes, but definitely a strong focus is definitely there in cities where we are not present.
Sourav Mondal
Okay. That answers the question. I was actually saying that because we are kind of taking our marketing initiative through store opening. That’s why I’m saying that. But that answers my question. Thank you.
Gautam Saraogi
Yeah, thank you so much.
Operator
Thank you very much. The next question is from the line of Abhishek Bhudolia from Narnolia Financial Services Limited. Please go ahead.
Abhishek Bhudolia
Hi, good evening, sir. I just wanted to ask your expectation for LFS was INR182 crores and your debtor days was 79. So your debtor days come about 159 days. So why is it so high? Can we take only LFS or debtors?
Gautam Saraogi
Yeah, Abhishek, see the thing is the debtors which is in our books is actually inventory on the shop floor. The unsold inventory is because of accounting standards is debtors in our books. So that’s why the number of days has always ranged between 150 to 155 days. So on an overall company revenue basis, our debtor days is between 37 and 40 days. But on a store level, it is high because the unsold inventory there is better than our books because the LFS partner will pay us only after they have sold it. It’s on SOR basis.
Abhishek Bhudolia
Okay. And you are sitting around INR220 crores of cash, and you make around INR50 crores of cash half yearly. So what’s really stopping you from rapidly opening stores? I mean, next year also you have given target of 120 gross stores only which has been constant for about multiple quarters and even your cash flow generation has declined from H1 to H1. So can you elaborate on the cash management strategy?
Gautam Saraogi
See, H1 to H1 the cash flow declined because last year was the year when we had reduced a lot of working capital and inventory. So last year, effectively the cash flow was a lot stronger. This year, we’ve not really reduced too much of inventory of working capital. So whatever PAT, whatever EBITDA we have generated has converted into operating cash flow. So one of the reasons why H1 this year versus last year H1 OCF might look even different is because last year only we had reduced working capital. As far as opening more stores rapidly is concerned, see, real estate sometimes can be very tricky. So we don’t want to be in a hurry and open wrong stores. So that’s why see, usually I’ve told in the past also that if we evaluate 1,000 locations, we end-up opening 120 to 150 stores because we have a 12% hit rate. So we’re trying to increase the number of stores we evaluate, and we formed a good busy team. So we’re trying to improve that larger number of new stores and end up opening more. But in real estate, we have to be very careful. If we do a very strong and fast expansion, we can sometimes end up opening wrong stores as well. So we want to maintain a quality hygiene as far as store expansion is concerned.
Operator
Thank you very much. The next question is from the line of Akhil Parekh from B&K Securities. Please go ahead.
Akhil Parekh
Hi, Gautam. I just have one question from a competitive landscape perspective. So if I look at Tier 1 cities — stores in Tier 1 cities, right, so have we done some kind of study in terms of what percentage of Zudio stores are there in close vicinity to Go Colors, because a year back even kind of DMart acknowledged that their apparel segment is getting impacted to some extent because of increased competition and because of players like Zudio. And we continue to see the footfalls in Zudio remain very strong even during last three months basically. So that is one. There is a competitive intensity in the Tier 1 cities. But in Tier 2 and beyond, we have almost 35% to 40% of the stores. Meesho which operates in those geographies has given an update that their sales have grown by 40% during first few weeks of the festive season. So is there some kind of impact, which probably we are not acknowledging in these two geographies, basically, which is Tier 1 and Tier 2?
Gautam Saraogi
So see we are largely more top 10 cities in majority of our network is there more in Tier 1 and top 10 cities. So for us, our experience has been very consistent honestly. I mean, our presence in rural is not very high. So we’ve not seen a very difference in experience between rural and urban honestly. As far as opening locations are concerned, see, look, we have been doing well and there are many other retailers who are also bigger. So we follow all such retailers.
Akhil Parekh
No, my question was, is the competitive intensity because of Zudio is impacting our sales in Tier 1 city or is the competitive intensity because of Meesho is impacting our sales in Tier 2 and beyond other?
Gautam Saraogi
Okay, okay. Sorry, I misunderstood your question. See, Zudio, or any other large format store will not impact us. We are a very specialized bottom wear brand with so many color options and product options. So for us, competition would be really someone else who is doing bottom wear in a dedicated manner. So that will be an apples-to-apples comparison. So right now, we don’t see any of the large formats who are out there eating into our share.
Akhil Parekh
Same holds true for Meesho as well you’re saying?
Gautam Saraogi
See, honestly, online players honestly are not competition for us because online is a completely different ballgame. So for us, like I mentioned, a dedicated brand in bottom wear selling online or offline would be real competition. Meesho is still again a marketplace. So the same example for LFS and Meesho go hand-in-hand from that perspective.
Akhil Parekh
Okay. That’s all from my side. Thank you so much.
Gautam Saraogi
Yeah. Thank you.
Operator
Thank you very much. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you, and over to you.
Gautam Saraogi
I’d like to thank everyone for being part of the call. We hope we’ve answered your questions. If you need more information, please feel free to contact Mr. Deven Dhruva from SGA, our Investor Relations Advisors. Thank you. Wish you everyone a very Happy Diwali and happy festive days. Thank you all.
Operator
[Operator Closing Remarks]