CAMPUS - Campus Activewear Limited Share Price

The management of Campus Activewear provided a cautiously optimistic outlook for the upcoming quarters during their Q1 FY'26 earnings call. The company reported a revenue of INR 343.3 crores for the quarter, reflecting a modest growth of 1.4% year-on-year. Key points shared about the outlook include:

1. Sales Recovery: Management anticipates a recovery in online sales following disruptions caused by the consolidation of their raw material warehouses and the implementation of SAP, which impacted the initial fortnight of sales. They expressed confidence in achieving high single-digit growth in online channels moving forward.

2. Product Diversification: The company launched over fifty new value-for-money styles and aimed to drive higher sales in their premium sneaker category, which saw remarkable growth of 150% year-on-year, increasing from 220,000 pairs to 550,000 pairs sold.

3. Average Selling Price (ASP): The average selling price increased by 14.7% year-on-year, from INR 586 to INR 671 per pair, indicating a successful strategy towards premiumization. This trend is expected to continue, with the management aiming to sustain ASP above this level, particularly as the sneaker segment expands.

4. Gross Margins: Gross margins improved by 210 basis points, rising from 53.3% to 55.4%, attributed to a higher mix of premium products and operational efficiencies.

5. Market Position: The management expressed confidence in maintaining double-digit growth and achieving EBITDA margins in the range of 17% to 19% over the next year, emphasizing that recent transitions are building blocks towards stable growth and improved profitability.

6. Distribution Initiatives: Significant steps are being taken to enhance distribution capabilities, such as hosting numerous distributor meets to boost relationships and order visibility.

Overall, the management remains optimistic about overcoming previous challenges and growing the brand's market presence amidst a dynamic competitive environment.

Major Questions and Answers from the Earnings Call Transcript

Question 1: "If you can tell us why online sales have declined sharply and how much of this is recoupable in the coming quarters?"
Answer: The decline in online sales was largely due to the transition of our raw material warehouse, which we consolidated from three to one. This took about 15-20 days, impacting our online service capability. We managed to maintain our distribution channel sales, but we couldn't supply enough material for online sales during that transition. We expect to recover high single-digit growth in the online channel from Q2 onwards.

Question 2: "What kind of benefit is this warehouse consolidation giving you?"
Answer: The new warehouse has doubled our capacity from 80,000 pairs to 200,000 pairs daily. This not only alleviates bottlenecks in the supply chain but also allows us to issue raw materials in advance, significantly improving efficiency and supporting our fabricators, which aids in scaling production effectively.

Question 3: "Will we see delivery happening on the P&L also?"
Answer: We recognize the delivery misses, but there's a consistent improvement in our EBITDA margins. The transitions and investments we are making now will optimize our capacity for future demand increases, and we are optimistic about getting back to our margin aspiration of 17%-19%.

Question 4: "Is there any specific region where there has been more ASP increase, or is it overall?"
Answer: The increase in ASP is broad-based but notably enhanced by our sneaker portfolio, which alone grew by 150%. Our focus on higher-priced products has allowed us to move away from lower-margin items, leading to an increase in ASP across the board.

Question 5: "So, would it be fair to assume that H2 is when a proper recovery would be seen?"
Answer: While Q2 will have challenges, we are confident about our trajectory. The sales have shown recovery in July, aligning with internal budgets. We still anticipate double-digit growth for the year, so we do expect a more robust recovery in H2.

Question 6: "Can you provide more on the sneaker business and ASP expectations moving forward?"
Answer: The sneaker segment is an essential focus for us and commands a higher price point, starting from Rs. 1,499. We aim for consistent growth in this area and expect our ASPs to rise further as we expand our premium offerings, although it isn't just about growth but also maintaining margin accretion through premiumization.