Titan Q2 earnings update
Last updated: 28 Oct, 2020 | 11:47 am
Earnings in-line with estimates: Titan has reported a net profit of ₹199 crore in Q2FY21, a drop of 38% as compared to the same period previous fiscal. Analysts had earlier estimated the profit at about ₹205 crore. The bottom line was impacted as the company recognised a loss of ₹484 crore due to pre-closure of hedging contracts originally designed against sales. The other expenses also nearly doubled to Rs 774 crore, impacting the net profit.
Revenue recovers: Titan has reported a 3% decline in revenue to ₹4,318 crore. This is higher than the ₹4,170 crore estimated by analysts. Jewellery segment which accounts for 80% of the overall sales, saw a 8.7% on-year rise in sales to ₹3,837 crore. Other segments including Watches (-44.3%), Eyewear (-39%) and Other (-47.7%) are still below their previous year mark.
Margins decline: Titan’s EBITDA fell 43% year-on-year to Rs 294 crore. Operating margin declined to 6.8% compared with 11.5% a year earlier. The margin of the company was lower due to an adverse mix – higher share of the lower margin jewellery business compounded by margin in the jewellery business itself being impacted by lower studded jewellery share and higher coin sales.
Stores re-open: Titan was able to operate most of its stores across all its divisions during the quarter, and customer walk-ins have improved even as social distancing norms continue.
Titan has reported results in-line with expectations. While the customer sentiment has improved as compared to the previous quarter, there was greater willingness to spend on plain gold jewellery and gold coins rather than discretionary items, explaining the reason why the recovery rates in Watches and Eyewear and studded jewellery within the Jewellery division were lower. The results are impacted due to a sharp drop in discretionary spending as well as the lockdown imposed to contain the pandemic. While the recovery in sales in various segments is encouraging, full-fledged demand recovery is at least a few months away.