Titan Company slips after Q2 business update

Titan Company fell 4.68% to Rs 1200.41 after the company said that the jewellery business witnessed a sharp fall in sales after a sudden surge in gold prices dented the consumer demand from mid-June 2019.

The weakness continued during July 2019 and resulted in considerable de-growth in sales during the month. While retail sales declined in July, between August & September the retail growth was 15% YOY over the same period in the previous financial year possible due to an enhanced level of promotions & schemes. Retail sales (secondary sales) therefore grew by 7% in Q2 September 2019 (Q2'20) but revenues as per financials declined 2% YOY in Q2'20 substantially due to adverse impact of the hedges matured during the quarter.

The jewellery division added a net of 21 Tanishq stores, with the retail space addition being approximately 67,000 sq. ft.

Weak consumer sentiments led to moderation in growth rate of the watches division to 7% for the quarter and 13% for the half year. The division added 17 WOT (World Of Titan) stores and closed 14, added 14 Fastrack stores while closing 6 and for Helios added 12 stores while closing 2 stores during the quarter.

The eye wear division witnessed robust growth of 28% for the quarter, partly aided by the participation in Essilor's offer of 'Buy One Get One'. The division added 43 stores during the year to date and also closed 19 stores, ending up with a net increase of about 16,000 sq. feet of retail space.

'Skinn' (Titan perfume) continues to increase its distribution reach and witnessed good growth during the quarter.

'Taneira' (ethnic clothing brand) opened its third store in Bengaluru and its first store in Pune, taking the total store count for the business to seven in four metros.

With respect to its subsidiaries, the company announced that 'TEAL' had an overall growth of 9% for the Quarter 2 and the growth has been at 33% for the six months. Business outlook for Second half of FY 20 looks positive with large orders that are expected to be executed and the company expects to meet its plan for the year.

Titan purchased 9,45,000 equity shares from one of the shareholders of online jewellery company, CaratLane, thereby increasing its stake in the subsidiary by 2.8%, from 69.5% to 72.3%. CaratLane's overall revenue grew at 75% during the quarter and the growth for the year to date was 67%.

Titan said that Bhaskar Bhat retired after serving the company for 33 years, with 17 years as its managing director. C.K.Venkataraman, who has been with the company for over 30 years and in the role of CEO of jewellery business since 2005, has taken over the role of managing director from 1st Oct.

Recently, a foreign brokerage firm reportedly upgraded the Titan Company stock to overweight from equal weight with a target of Rs 1,300 from Rs 1,110 per share. The brokerage is of the view that strong growth in a difficult macro environment should be rewarded by re-rating. The research firm has raised FY20, FY21 and FY22 EPS estimates by 3%, 2% and 1% respectively. It believes that Titan's ongoing marketing and promotion spends are unprecedented.

Meanwhile, the S&P BSE Sensex was up 39.78 points or 0.11% to 37,571.76.

On the BSE, 1.32 lakh shares were traded in the counter so far compared with average daily volumes of 1.15 lakh shares in the past two weeks. The stock hit a high of Rs 1209.3 and a low of Rs 1177.75 so far during the day.

Titan Company has added 8.8% over last one month compared with 1.14% rise in the Sensex.

The stock hit a 52-week high of Rs 1345.55 on 23 Sep 2019. The stock hit a 52-week low of Rs 731.7 on 09 Oct 2018.

Titan Company's consolidated net profit rose 10.8% to Rs 363.74 crore on a 15.6% surge in net sales to Rs 5,095.10 crore in Q1 June 2019 compared with Q1 June 2018.

Titan Company is engaged in offering watches, jewelry and others. The company's segments include watches, jewellery, eyewear and others.

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