Future Lifestyle Fashions Ltd Q2 FY20 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue 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 Fashions Ltd 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 Fashions Ltd 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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