Knitwear brand, Rupa & Company Ltd is looking to strengthen its retail footprint by setting up exclusive brand outlets (EBOs) and opening stores in high footfall areas. The company, which has 24 MBOs at present, is looking to take it up to 40 by the end of FY23. The company is looking to strengthen its focus on modern trade channels even as it looks to grow its turnover.
According to Vikash Agarwal, whole-time Director, Rupa, modern trade EBOs contribute roughly 10 per cent of the company’s total top line and has been clocking a double digit growth.
“Our expansion strategy continues in our quest to strengthen our retail footprint nationwide. We are now planning to open stores in high footfall areas. We are going with our EBO plans more aggressively. Our modern trade business will continue to deliver double digit growth,” Agarwal told analysts in the earnings conference call post the results.
The company’s modern trade business witnessed steady traction in growth and stood at 1.2x of H1. It also saw good traction in the export business, which stood at 1.7x of H1 FY22. Export in the modern trade business contributed together around 10 per cent of its total revenue of H1 FY23.
General trade channels currently account for a major portion of distribution accounting for approximately 87-88 per cent of total sales. Modern trade contributes around five per cent, while overseas business contributes around five per cent.
Prices to stabilise
The company’s revenue from operations for the quarter ending September 30, 2022 was down by nearly 22 per cent at ₹286 crores. The EBITDA margin stood at 10.2 per cent as compared to 19.4 per cent over the same period last year. However, it registered a rise of 160 basis points from 8.6 per cent during Q1 FY23.
The decline in EBITDA margin was majorly attributed to the volatile raw material prices that have impacted the gross margin, as well as the significant increase in marketing expenses. Also, the contribution to sales from its high-margin products, such as thermal and athleisure, was much lower compared to the last year, it said.
According to Agarwal, yarn prices look stabilized now and it should rather pick up from these levels.
“We are quite hopeful and as the prices are stable; once it starts picking up, demands will also pick up. Q3 recovery is there, of course, but the performance will actually depend upon the winters because it is more of a thermal season. So inner wear is recovering, but a large part will depend upon thermal wear sales,” he said.