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The market has given a thumbs down to Titan Company's poor performance during the March quarter. The stock was down 5 per cent on Friday.
Titan reported a 11.2 per cent, year-on-year, drop in net sales. Profits inched up by 4.2 per cent to ₹215 crore, thanks to tax savings and a marginal improvement in operating margins. Tax savings were on account of higher production from the Patnagar jewellery plant, which enjoys tax exemptions.
The jewellery segment reported a 15 per cent drop in sales. The company has cited weak demand and absence of sales from its gold saving scheme (which was stopped due to regulatory changes; there is a new scheme now, which will add to revenues after the December 2015 quarter) as reasons for its poor performance. The watches segment didn’t do well either. Volumes dropped six per cent, year-on-year. Sales, however, grew 1.8 per cent, aided by price increases.
Titan expects to grow its market share this year by lowering prices and making charges in its jewellery business. This, along with absence of sales from the gold harvest scheme, is likely to add pressure on margins in the coming quarters. In the March quarter operating margin was 10.9 per cent, a tad higher than the 10.6 per cent reported during the same period last year.
Sales may get a boost from the company's aggressive marketing strategies and focus on expansion of its retail network. Titan added 29 new stores during the March quarter.
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