DOLLAR - Dollar Industries Limited Share Price

The management of Dollar Industries provided an optimistic outlook during the Q1 FY '26 earnings call. The Indian apparel industry is estimated to grow at a 9% CAGR, reaching a market size of $108 billion by FY '25, driven by rising incomes and e-commerce accessibility. Dollar Industries achieved Q1 FY '26 operating income of INR 399 crores, a 19.6% year-on-year increase, with an 18.7% increase in volume. The premium segment saw a strong value growth of 24%, while athleisure grew by 14.3%.

Key forward-looking points included a strategic focus on premiumization, which boosted average selling prices by 3.8%, and stable raw material costs expected to enhance margins. The management aims to reduce the cash conversion cycle to 150 days from 173 days, reflecting improved inventory management.

Management highlighted that modern trade, e-commerce, and quick commerce channels delivered robust growth, with a remarkable 65.2% value increase and 82% volume growth compared to the previous year. The athleisure segment, valued at $13.15 billion in 2024, presents significant long-term growth opportunities.

For Project Lakshya, the contribution to total revenue increased to 32% in Q1 FY '26, while the company plans a cautious expansion into Madhya Pradesh and Jharkhand to reach 70% contribution by FY '26. The management also noted a reduction in net debt from INR 329 crores in March '25 to INR 278 crores by June '25 and projected further reductions aimed at achieving a net debt-free status by FY '28.

Overall, the management expressed confidence in leveraging growth through strategic initiatives in premium segments and e-commerce, and indicated a commitment to improving operational efficiencies while navigating competitive pressures.

Major Questions and Answers from the Earnings Call Transcript

1. Question: "What are your company's plans or strategies to reach the target of 70% contribution from Project Lakshya by fiscal year '26, given the expansion into Madhya Pradesh and Jharkhand?"
   Answer: "In Q1 FY '26, our contribution from Project Lakshya was 32% without increasing distributors. We've slowed implementation due to market competition, which has disrupted market dynamics. Although we're not aggressive, we aim to optimize and complete the project within two years."

2. Question: "What have you done differently in the last 1 or 2 years for the uptick in modern trade and e-commerce channels?"
   Answer: "We've deeply integrated across platforms like Myntra and Amazon, enhancing delivery speed. For modern retail, we've partnered with Walmart and Spencer's to expand our presence. This approach has streamlined our operations and improved customer delivery times."

3. Question: "How has the competitive intensity in the industry affected your growth, particularly against competitors like Page Industries?"
   Answer: "Page targets different consumer segments than we do, primarily through organized retail. Our growth reflects strong demand in trade channels, not due to competitor downgrades. For example, in Gujarat, we achieved 25% growth, indicating effective secondary sales on our part."

4. Question: "Is the high competitive intensity leading to continued discounting in the market?"
   Answer: "While discounting has decreased, it's still above optimal levels. However, we anticipate improvements in pricing strategies in the upcoming quarters as we adapt to market conditions."

5. Question: "What initiatives are you taking regarding export growth by targeting specific geographies?"
   Answer: "We're focusing on the Gulf region with increased efforts in Africa and Myanmar. Though entry into these markets is challenging due to counterfeits, we hope to expand significantly in exports through tailored strategies."

6. Question: "Can you break down your innerwear, outerwear, and athleisure product mix in revenue terms?"
   Answer: "Currently, our sales mix is 85% innerwear, 12% athleisure, and the rest includes thermals and outerwear. We're optimistic about accelerating growth in athleisure and rainwear products, aiming for broader market penetration."

7. Question: "What are your expectations regarding cotton prices going forward?"
   Answer: "Cotton prices have been stable around INR55,000 to INR56,000. Given a good agricultural outlook for cotton, we expect prices to remain stable over the next 6 to 12 months, with no need for price hedging."

8. Question: "What can you tell us about your target for advertisement expenses for the year?"
   Answer: "Our advertisement expenses in Q1 were around INR29 crores, up from INR24.5 crores last year. We aim to cap total advertising expenses at INR80 to INR90 crores for the fiscal year, reflecting a balanced approach to brand promotion."

9. Question: "How has the rollout of Project Lakshya influenced inventory and debtor days?"
   Answer: "Debtor days in Lakshya areas are notably lower"”about 30 to 35 days better than non-Lakshya distributors. This efficient inventory management ensures our sales force maximizes delivery effectiveness, supporting reduced inventory levels."

10. Question: "Could you provide clarity on the recent spike in other expenses by 90% year-over-year?"

Answer: "The rise in expenses is primarily due to promotional activities linked to IPL advertising. Although this quarter reflected higher expenses, we maintain an overall budget consistent with our financial strategies, ensuring control over total costs."