Brand Concepts Ltd specializes in the manufacturing of bags, backpacks & fashion accessories for the Indian & International markets.
KEY POINTS
Business Model
The Company enters into franchise or trademark license agreements with reputed brands.
Analyses the brand and other factors and creates a product design, a sample is manufactured and on approval from the brand it outsources its manufacturing activities to the manufacturers located in India and China (majorly).
They have exclusive rights for Tommy helgifer and United colour of Benetton. Guiding for 30+ percent growth for next few year.
Concall Notes - May 2023
Revenue and Growth:
- Year-on-year revenue growth of almost 90%
- Aims to achieve a high growth of 30% CAGR and become a Rs. 500 crore company in the next four years
- Expects a 20% growth in current business and 8% from the two new brands (UCB and Aeropostale)
- Confident in delivering over 30% growth this year
New Brands:
- Signed up two new brands, United Colors of Benetton and Aeropostale
- Exclusive licensee for UCB in India for all channels and regions, including their own stores
- Aims to sign two new brands within the current financial year
- Target audience of Tommy Hilfiger are those who aspire to wear the brand, not those who are not aware of its positioning
- Aims to be more inclusive rather than exclusive in its brand positioning, with Benetton being more affordable and Tommy Hilfiger thriving on exclusivity
- Aims to have one brand in the bridge to luxury segment and another in the mass-premium space
- Company plans to enter lower price segments with brands like UCB and Aeropostale
- Aims to enter the lower price point segment with new brands to unlock value
Product Development:
- Starts product development after signing the agreement with a brand
- Process of designing, sampling, and production for new products takes approximately 7 to 9 months
- Aeropostale is expected to hit stores before UCB
Store Expansion:
- Target is to have 50 stores by the end of the year
- CapEx for a franchisee store is around 40-50 lakhs, including stock investment and rent deposit
- Company is free to open UCB Travel Gear exclusive stores
- Company plans to invest in its own stores in top locations and take a franchisee route for Tier 2 and Tier 3 locations
- Company plans to steadily grow its number of stores, with a focus on good locations and potential airport stores
- Underpenetrated in terms of distribution and plans to increase its number of distributors and large format stores
- In talks with large format stores to enter with new brands, including UCB and Aeropostale
Financials:
- Gross profitability has increased, but contribution has gone down due to increased selling distribution expenses from marketplace activities
- Company is financially prudent and aims to maintain its current levels of profitability while expanding
- Marketing spend will not be high as the company is a licensing company and not focused on building brands from scratch
- Company spent about Rs. 3.13 crores on marketing in FY23, and marketing spend is expected to remain under 5% in the future
- Company’s margins are slightly better in e-commerce, and almost 16-17% of overall sales in FY23 came from their own marketplace
- Contribution from lower-priced brands will be lower but EBITDA margins will remain the same
- Channel margin of 50% includes GST, which is 18% in the company’s case
Market and Competition:
- Travel gear market in India is estimated to be between Rs. 24,000 crores to Rs. 50,000 crores
- Organized travel gear market is around Rs. 5,000 crores to Rs. 6,000 crores
- TH is positioned in the Rs. 500 crore to Rs. 700 crore market, while UCB and Aeropostale are in the Rs. 2,000 crore to Rs. 2,500 crore market
- There is no syndicated study for the Small Leather Goods segment
- Tommy Hilfiger is the market leader in small leather goods in all channels of operation, positioned as a premium brand
- Sees a huge opportunity in India as a manufacturing sourcing hub for brands shifting from China
Merger and Quality Assurance:
- Merger of the company with its overseas promoter is in process and will be effective from April 2024
- Company is setting up a new department for quality assurance and has started offering international warranty on its bags
Sales Mix:
- Sales mix currently consists of 46% Small Leather Goods, 43% Travel Gear, and 11% Women Handbags & Accessories, but the company expects Travel Gear to increase in the future
- Tommy Hilfiger contributed to about 80-83% of overall sales, with some sales coming from discontinued brands like AND and Global desi
- Primary wholesale billing for all sales, including at large format stores
CapEx and Manufacturing:
- CapEx for hard luggage manufacturing is expected to be around Rs. 15-17 crores, and the company plans to occupy 50% of the capacity of the merged entity
- Plans to manufacture 50% in-house and 50% through contract manufacturing
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