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Arvind Fashions Ltd.

BSE: 542484 Sector: Others
NSE: ARVINDFASN ISIN Code: INE955V01021
BSE 11:32 | 21 Jan 311.20 -1.40
(-0.45%)
OPEN

310.00

HIGH

314.55

LOW

301.80

NSE 11:24 | 21 Jan 310.35 -1.90
(-0.61%)
OPEN

312.00

HIGH

314.75

LOW

305.40

OPEN 310.00
PREVIOUS CLOSE 312.60
VOLUME 7388
52-Week high 364.00
52-Week low 123.20
P/E 555.71
Mkt Cap.(Rs cr) 4,119
Buy Price 310.10
Buy Qty 1.00
Sell Price 310.55
Sell Qty 9.00
OPEN 310.00
CLOSE 312.60
VOLUME 7388
52-Week high 364.00
52-Week low 123.20
P/E 555.71
Mkt Cap.(Rs cr) 4,119
Buy Price 310.10
Buy Qty 1.00
Sell Price 310.55
Sell Qty 9.00

Arvind Fashions Ltd. (ARVINDFASN) - Chairman Speech

Company chairman speech

FY21 was an important year for your company Arvind Fashions Limited(AFL). The company carried forward the initiatives started in FY20 with therationalization of its portfolio and strengthening its operations in its journey to becomea more nimble and agile organization that can respond to economic headwinds at a shortnotice. FY21 was also a watershed moment in the history of our nation and of your companyas well. The pandemic that started to disrupt the economic activity as early as Mar'20peaked during the fiscal including a few months of almost complete standstill in theeconomy esp. in discretionary categories.

Anticipating the need to have a focused approach towards the well-beingof the organization and its constituents the priorities of the company were repurposed torespond to this once in a century black swan event. Following actions were undertaken totide over the pandemic induced slowdown:

1. Extended medical care and support to all its employees —Hospital & Bed support medical help line critical care support

2. Digital drive to reach to the customer directly at her home - Directto consumer focus

3. Cost optimization with suppressed revenues - Rent negotiationmanpower optimization fixed cost reduction

4. Working capital optimization - Reduction of gross working capital by500 Cr

5. Recapitalization of the company

6. Strategic partnership with leading e-commerce player for one of thepower brand - Flying machine

7. Closing of unviable stores and brands leading to a lean portfolioof 6 focus brands (USPA Tommy Hilfiger Flying Machine. Arrow. Calvin Klein and Sephora)

The above actions helped us to tide over this pandemic and emergestronger to grow profitably in the years to come.

First half of the fiscal was a wash out because of extended lockdownsfirst nationally and then regional. The business started to pick up pace with reducednumber of Covid cases and the onset of festival & wedding season in Q3 Q4 saw someimpact of Covid second wave in March '21 but given the significantly larger impact ofCovid in March '20. our retail channel saw growth over corresponding quarter lastyear. Our key brands eg USPA Tommy Hilfiger Calvin & Sephora registered high doubledigit same store growth with improved share of direct to consumer revenue. In additionthe focused categories like footwear & innerwear emerged as our next growth enginesFootwear more than doubled its revenue in Q4 and grew high double digit year on year basisdespite Covid impact.

The company has witnessed a sea change in the consumer behavior in thepost pandemic world and believes that most of these changes are going to become the newnormal in times to come. There was an accelerated shift towards casualization and a highdegree of digital adoption with e-commerce channel becoming extremely prominent and morerelevant than ever.

Your company is well poised to capitalize on the new consumer behaviorwith its digital eco system & "right for online" casual brands. We areIndia's leading offline to online apparel led lifestyle organization with a complete techstalk capable of managing own website market place operations and full on-ground omnioperations. Our portfolio of brands is apt for the digital casualization in the postpandemic world. Our portfolio includes U.S Polo Assn. - the market leader among casualbrands. Tommy Hilfiger - the leading super premium casual wear brand. Flying Machine -amongst the top three denim brands in the country & Calvin Klein - the leading superpremium denim brand. The strategic tie up with Flipkart group last year on Flying machinebrand has helped the brand scale up multifold on digital channels.

Your company has been an early adopter of digital with a deep focus onOmni-channel capabilities even before onset of Covid. We were able to further scale up ourdigital & Omni play by extending our marketplace integrations with all largee-commerce players. Connecting the stores and warehouses to online portals helped manageour inventory turns and store productivity. We also further strengthened our e-commercefulfillment capabilities with 5 dedicated B2C (Business to customer) warehouses withcapacity to service up to 30000 orders per day. thereby reducing the delivery time forcustomers. Your company was able to leverage its existing and fresh investments in thedigital ecosystem during the pandemic crisis with digital revenue contributing to 1/3rdof the annual revenues.

The company has witnessed a sea change in the consumer behavior in thepost pandemic world and believes that most of these changes are going to become the newnormal in times to come. There was an accelerated shift towards casualization and a highdegree of digital adoption with e-commerce channel becoming extremely prominent and morerelevant than ever.

Your company is really excited about the opportunity that our prestigebeauty retailer Sephora presents. With its share of exclusive brands from the globalportfolio Sephora has a niche of its own. With scaling up of Omni competence we believethat Sephora is ready to outpace the growing beauty market in India.

In the year gone by there was a renewed focus to reduce fixed cost onmultiple fronts in order to achieve a leaner cost structure and create a 'Fit for Future'organization. Store rentals were negotiated for the lock down periods and structuralchanges were made to store costs. Unviable stores were closed down across the brandportfolio. Your company also consolidated B2B (Business to Business) warehouses from 11locations to 4 locations leading to a large structural cost saving in B2B warehouseoperations. Corporate overheads were rationalized significantly. Overall your company wasable to save around 500 Cr of fixed cost for the year. The efforts of the year gone by arelikely to result in structural annual cost saving of over 100 Cr on an on-going basis.

Your company put equal emphasis on optimizing working capital needs ofthe organization. Significant progress was made in FY21 to reduce the inventory levelsespecially aged inventory across brands. We were able to reduce overall Inventory by ~400Cr to take the inventory COGS turns up to 2.0 (annualized on H2 sales) from 1.5 last year.Receivables also improved markedly by 125 Cr as we linked customer credit to their creditworthiness. Further processes have been adopted to manage timely inventory flow thatallows buying much closer to the market thereby reducing the inventory holding period andimproving response to market trends. This will help your company to further enhanceinventory turns and reduce future capital requirements as we get back on growth path.

Your company has also raised non-debt funds of Rs 760 Crs during FY21through a combination of rights issue and strategic investment from Flipkart into HyingMachine. With this funds infusion coupled with the release of Rs. 525 Crore in inventoryand debtors your company was able to reduce the debt by ~300 Cr

For the financial year ending March 2021 Arvind Fashions postedrevenue of Rs 2201 Crs and an EBITDA profit of Rs 121 Crs. Expectedly revenue and evenmore so profitability was significantly impacted by Covid pandemic.

In summary with a focused portfolio of six strong brands andsignificant Omni eco system capabilities your company is in a strong position to leveragethe opportunities available in the new post pandemic world where consumer buying behavioris strongly moving towards direct to consumer channels. With low fixed cost structure andworking capital optimization we are a more capital efficient organization. Moving forwardwe will invest behind our high-conviction brands and ensure that we significantly enhanceour profitability and return ratios in the years to come.

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