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In the earnings conference call for Q4 FY '25, management provided an optimistic outlook for the upcoming year. They expect continued growth in the retail sector, driven by rising disposable incomes, urbanization, and a growing middle class. The management anticipates that retail growth will gain further momentum from Q2. They plan to focus on premiumization, enhancing customer-centric experiences, and increasing technology adoption, especially in AI and automation.

Key forward-looking points include:

1. The company aims to open 6 to 7 departmental stores and 40 to 60 INTUNE stores during FY '26, contingent upon improving market conditions.
2. Forecasted growth in their beauty segment, with Global SSBeauty expected to have another record year.
3. A projected significant decrease in borrowings as they plan to finance their entire capex through internal accruals.
4. The management reported an improved EBITDA margin by 730 bps in Q4 and by 530 bps for the full year, which they attribute to increased premiums and better inventory management.
5. The First Citizen program achieved significant customer loyalty, with repeat customers growing by 3.3% to 69% and contributing 82% to sales, signaling strong customer retention.
6. The INTUNE segment is expected to mature and improve in profitability as the majority of its stores will surpass the one-year mark, enhancing performance metrics.

Overall, the management's strategic focus on premiumization and customer experience, alongside commitments to responsible borrowing, positions the company favorably for FY '26.

Major Questions and Answers from Q4 FY '25 Earnings Conference Call

Question 1: Can you explain the significant increase in other expenses? What is the nature of these expenses, and can we expect moderation going forward?

Answer: The increase in expenses primarily stems from the launch of new businesses, particularly INTUNE, which accounts for over half of this rise. Non-GAAP figures show a 10% increase year-over-year. For FY '26, we anticipate maintaining cost levels and achieving decent like-for-like growth, so any future adjustments will depend on overall demand.

Question 2: Regarding INTUNE's store expansion, your guidance is for 40 to 60 new stores. What caused the previous underachievement?

Answer: The previous year's constraints were mainly due to environmental limitations in the NCR region that delayed store openings. Going forward, we have analyzed our operational learnings and aim to enhance store productivity. The 40 to 60 figure remains conservative, as we foresee flexibility in expanding further based on market conditions.

Question 3: What kind of EBITDA margins do you expect with potential mid-single-digit same-store sales growth?

Answer: We aim for slightly higher non-GAAP EBITDA margins than mid-levels, primarily driven by leveraging benefits. Our cost rationalizations and operational efficiencies should help in maintaining or improving margins under conducive growth conditions.

Question 4: What are your expectations for INTUNE's performance compared to other value retailers seeing strong growth?

Answer: INTUNE's network primarily consists of newer stores, which are still ramping up. While we see overall industry strength in value fashion, our younger store average impacts performance. However, we are optimistic about matching or exceeding industry standards as older stores mature.

Question 5: Are your departmental store growth expectations realistic given previous performance?

Answer: Although looking at the store openings, we are guiding for 6 to 7 new departmental stores while remaining vigilant about profitability. Our KPIs, including customer entries, have shown significant improvement, and we are focused on positioning stores strategically to drive growth.

Question 6: How do you manage inventory, particularly dead stock, in INTUNE?

Answer: We follow a practice of conducting two end-of-season sales each year to liquidate inventory no longer achieving full-price sales. This allows us to manage our inventory effectively while also giving us opportunities for re-launching products during sales events.

Question 7: Can you detail the criteria used for selecting brands in SSBeauty?

Answer: We evaluate brands based on their equity, revenue-generating potential, margins, and market demand. We aim to cover all price points, including premium and mass-market options while ensuring swift distribution to meet consumer preferences effectively.

Question 8: What is your strategy if you successfully onboard a majority of beauty brands?

Answer: The market size is vast, and we will continue to expand our distribution business. We focus on building depth in our existing brand partnerships while onboarding new ones. The journey in beauty distribution is just beginning, with significant growth opportunities ahead.

Question 9: What is your pricing strategy moving forward for INTUNE?

Answer: Currently, our pricing ranges from INR 149 to INR 999, averaging around INR 400 to INR 450. While we have no immediate plans for price hikes, we anticipate that as we increase sales volumes and optimize our supply chain, we will have opportunities to improve margins over time.

Question 10: What percentage of your INTUNE stores are located in malls versus high streets?

Answer: Currently, about 60% of our INTUNE stores are situated in malls, while 40% are in high street locations. We believe that mall stores tend to perform better, and we will continue to focus on optimizing this mix for better profitability.