Key highlights from Titan Company Ltd (TITAN) Q2 FY24 Earnings Concall
- Jewelry Business Growth
- Jewelry business saw strong 27% growth in customer price terms in Q2.
- Primary sales growth was lower at 20-21% due to higher discounts and promotions vs. last year.
- Underlying jewelry demand momentum remains robust.
- Margin Outlook
- GM expected to remain stable for most segments except some impact in jewelry business.
- Jewelry business margins may see some dilution over next 6-7 months due to inventory effect of diamond price corrections.
- Impact is not expected to be very material.
- Tanishq vs. CaratLane
- Tanishq gaining share in high value gold and diamond jewelry segments given low existing share.
- 50% of Tanishq’s growth driven by ticket size increase, rest by new buyers.
- CaratLane focused on affordable jewelry segment where scope for ticket size increase is limited.
- CaratLane growth more buyer-driven, especially in sub-50k price points.
- New buyer growth for Tanishq much higher in greater than INR2 lakh ticket sizes.
- New Buyer Profile
- New buyers contributed 48% of jewelry sales.
- Typically start at lower ticket sizes of greater than INR75,000 when sampling brands.
- Migrate to higher tickets of INR2 lakh plus over 3-4 years.
- Largely traditional plain gold buyers shifting from unorganized sellers.
- Metros and bigger cities also see studded buyers in Mia and Tanishq sub-50k range.
- International Tanishq Performance
- Opened 13 Tanishq stores outside India including Singapore, Houston, Qatar.
- Performing well with high studded jewelry sales shares.
- Getting good repeat customer traction.
- Recently opened first international MIA store in Dubai.
- Helping attract non-Indian customers too.
- Zoya Expansion
- Currently has 8 stores, targeting 15 stores by next Diwali festival.
- Besides standalone stores, Zoya also present in Tanishq galleries.
- Consumer sales was INR140 crores last year, targeting 50% growth this year.
- Margin profile better than Tanishq given 95% studded jewelry.
- All stores are currently company owned, may evaluate franchise model.
- Lab Grown Diamond Impact
- Currently limited impact in India, more prevalent in US bridal segment.
- Price of lab grown diamonds crashing, causing issues for retailers selling both.
- In India, natural diamonds have stored value and investment appeal.
- No demand for lab grown diamonds seen currently in India.
- Will monitor impact over next 3-5 years and explore options accordingly.
- New vs. Repeat Buyer Contribution
- Typically see 47-53% split between new and repeat buyers.
- Skewed towards repeat buyers in mature stores, new buyers in new stores.
- Repeat buyers spend 2-3x more over lifetime at Tanishq.
- For CaratLane and Mia, repeat buyers buy more frequently but at similar ticket sizes.
- Margin Performance and Outlook
- Sharp expansion in margins excluding bullion to 14%.
- Q2 typically has higher margins than Q1 due to festive diamond activations.
- This year margins normalized, decline of 1.3-1.4% versus last year.
- Higher studded share, better gold portfolio realizations helped margins.
- Guidance of 12-13% gross margins for jewelry division remains consistent.