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Future LifestyleQ2 FY20

Future Lifestyle Q2 FY20 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹1.15Market Cap: ₹23 CrSector: Retailing

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3
  • Brand Factory demonstrated strong double-digit volume growth (~15%) in H1 FY20.
  • Like-to-like growth for Brand Factory was 6%, with overall revenue growth about 41% for the quarter.
  • Central store grew 18% in revenue with like-to-like growth at 10%, adding 4 stores in H1.
  • Brands business grew 21% with strong performance from non-Power brands like Converse and Privilege Club.
  • Power brands saw flat growth, primarily due to pruning of non-performing sub-brands.
  • Digital business (Brand Factory online) is in early stages, targeting a run rate of Rs. 15 crores/month; expected to expand cautiously over 12-15 months.
  • Physical store expansion for Brand Factory is estimated at 20-25 new stores per year, focusing on Tier-2 and Tier-3 cities.
  • Expansion strategy balances physical stores and omnichannel (online + offline) growth to exploit larger markets beyond Tier-1 cities.
  • Moderate like-to-like growth expected with continued tactical inventory liquidations.

See what Future Lifestyle management said on margin guidance — free account, 30 seconds.

Fundraise plans

Yes
  • Rs. 300 crores received from Apollo as a pure equity deal; no fixed IRR promised to the investor (Page 15).
  • Rs. 1,100 crores investment into Ryka via convertible debentures (Page 12).
  • Management aims to keep debt at less than 2x EBITDA, currently at 1.5x EBITDA, with a plan to maintain or reduce absolute debt levels by FY21 despite growth plans (Page 15).
  • No explicit mention of immediate new fundraising planned; focus is on prudent capital allocation and prioritizing assets that give disproportionate returns (Page 6).
  • Simplification of investment structures and possibly tapping equity fund raise or bringing strategic partners for Lee Cooper entity planned within 2-3 quarters (Page 11).

See what Future Lifestyle management said on order book — free account, 30 seconds.

Capex plans

Yes
  • CAPEX in H1 FY20 was around Rs. 250 crores.
  • Planned CAPEX for the full year is expected to be around Rs. 450 crores.
  • This includes opening four more Central stores and 8 to 10 Brand Factory stores in the second half of the year.
  • Cost reduction actions have commenced for CAPEX, especially for new stores, targeting a 15%-18% cost reduction per square feet for Brand Factory.
  • Strategic investments include equity funding such as Rs. 300 crores from Apollo (an equity deal with no fixed IRR).
  • Blackstone and Ryka have invested Rs. 1,100 crores into Ryka in the form of convertible debentures.
  • Plans to simplify subsidiaries and JVs, including a transaction for Lee Cooper expected to complete in 2-3 quarters.

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Margin guidance

Category 3
- The company aims to keep debt below 2x EBITDA, currently at 1.5x, and maintain or reduce this ratio by FY21, supporting controlled growth. - Base business (Central, Brand Factory, Brands) showed 17% revenue and EBITDA growth in H1 FY20 with a 9.6% EBITDA margin, reflecting reasonable performance in a tough macro environment. - Digital business (Brand Factory online) is targeted to become a sustainable long-term growth pillar, with cautious expansion expected over 12-15 months and losses in H2 around Rs. 8-10 crores due to platform costs. - Brand Factory online helps penetrate Tier-2 and Tier-3 cities, reducing customer acquisition cost and complementing physical stores, supporting margin improvements gradually. - Margin improvement in bridge business expected at 30-40 bps over time, with a focus on pruning non-performing sub-brands and optimizing capital allocation. - Profit after tax impacted by new Ind-AS116 lease accounting but management expects adaptation and stronger balance sheet over 18-24 months. Overall, the company projects steady revenue and margin growth with disciplined capital and cost management.

Order book

The provided transcript and pages from the Future Lifestyle Fashions Limited Q2 FY20 earnings call do not contain any explicit information or data regarding the company's current or expected order book or pending orders. The discussion primarily covers financial performance, digital business strategy, debt levels, brand pruning, store expansion, cost-saving initiatives, and investment details. Hence, no specific details about order book or pending orders are available in the extracted text.

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