Arvind Fashions Ltd. · NSE:ARVINDFASN
Arvind Fashions — Q4 FY20 Earnings Presentation
34 slides from Arvind Fashions's earnings presentation, July 2020
Slide 1: Q4 FY20 Performance Highlights
Arvind Fashions Limited Q4 FY20 Performance Highlights Jul 2020 0
Slide 2: Agenda
Strategic Investment Q4 & FY20 Results Update Agenda Covid Actions & Opportunities 1
Slide 3: Arvind Fashion Inducts Flipkart as an Investor in its Flying Machine Business
Arvind Fashion Inducts Flipkart as an Investor in its Flying Machine Business, Strengthens the Partnership AFL to sell shares in its subsidiary company, Arvind Youth Brands Private Limited (AYBPL), which houses Flying Machine business, to Flipkart for a cash consideration of Rs 260 Crs. With this
Slide 4: Partnership to Accelerate Flying Machine's Journey to Rs. 1000 Crs. Brand
Partnership to Accelerate Flying Machine’s Journey to Rs. 1000 Crs. Brand FLYING MACHINE Flipkart – Leading AFL – Fashion Straddle premium and value segment through a distinctive Fashion Powerhouse product/retail strategy Marketplace 1. Premium retail • Evolve and enrich premium product line India
Slide 5: Agenda
Strategic Investment Q4 & FY20 Results Update Agenda Covid Actions & Opportunities 4
Slide 6: FY20: Strategic Priorities
FY20 : Strategic Priorities 1 Power Brands set up for accelerated growth with alignment between primary & secondary sales, energizing retail, category expansion with improved working capital efficiency 2 Gap, Sephora and retained emerging brands positioned to deliver next wave of growth in sales and
Slide 7: Hits & Misses FY20
Hits & Misses FY20 Reenergize Retail High Growth in Focus Growth Momentum of Upgraded Digital Categories GAP & Calvin Klein Capabilities • Upgraded key stores of • Innerwear: 24%+ • High double digit growth • Scaled up digital capabilities power brands with improved profitability to build a strong o
Slide 8: Q4 Highlights
Q4 Highlights Power Brands Specialty Retail Emerging Brands On recovery path to growth before GAP & Sephora continuing its • Growth momentum continues in COVID (Jan/Feb) - LTL growth of 7% growth path with improved Calvin Klein – LTL growth of 8% with double digit EBITDA profitability • Restruct
Slide 9: Q4 FY20 - Performance Snapshot
Q4 FY20 - Performance Snapshot Without IndAS116 Impact IndAS116 Q4 FY19 Q4 FY20 Growth Q4 FY20 Sales (Rs Crs.) 1169 710 (39%) 710 EBITDA (Rs Crs.) 85 (92) - (10) EBITDA % 7.3% (13.0%) - (1.4%) PBT (Rs Crs.) 6 (177) - (143) PBT (Rs Crs.) 6 (237) - (204) (Incl Exceptional Items) PAT (Rs Crs.) 20 (238)
Slide 10: Q4 FY20 – Result Update Normalised for Covid Impact
Q4 FY20 – Result Update Normalised for Covid Impact Sales (Rs Crs.) EBITDA (Rs Crs.) 1,052 43 342* 710 135** (10%) (39%) Reported Q4 Sales Loss in Q4 Normalized -92 Reported Q4 Sales Loss in Q4 Normalized * Including additional returns provision on account of Covid 19 9 **Impact of Margin on account
Slide 11: FY20 - Performance Snapshot
FY20 - Performance Snapshot Without IndAS116 Impact IndAS116 FY19 FY20 Growth FY20 Sales (Rs Crs.) 4644 3866 (17%) 3866 EBITDA (Rs Crs.) 288 (117) - 231 EBITDA % 6.2% (3.0%) - 6.0% PBT (Rs Crs.) 13 (453) - (436) PBT (Rs Crs.) 13 (513) - (496) (Incl Exceptional Items) PAT (Rs Crs.) 17 (418) - (401) 1
Slide 12: Groupwise Performance – Continuing business
Groupwise Performance – Continuing business Sales (Rs Crs.) EBITDA (Rs Crs. & % of Sales) FY19 FY20 Normalized Growth FY19 FY20 Normalized Power Brands 746 681 (8.7%) 105 14.1% 70 10.2% Qtr. 4 Specialty Retail 230 240 4.4% -19 (8.3%) -15 (6.1%) Emerging Brands 154 129 (16.5%) -1 (0.8%) -7 (5.4%) Tot
Slide 13: Focus Categories Growing at 20%+
Focus Categories Growing at 20%+* Premium Kidswear Innerwear Prestige Beauty 20%+ 24%+ 25%+ FY19 FY20 FY19 FY20 FY19 FY20 12 * Growth rates till YTD Feb
Slide 14: Distribution Footprint Well Entrenched Across Multi-Channels
Distribution Footprint Well Entrenched Across Multi-Channels Q4 FY20 Exit North Store Sq Ft (Lacs) Store Count Count 485 West Stores 1290 20.7 Store Count 259 Dept. Stores 3729 - East Store Count 151 MBO 10000+ - South Store Count Innwer wear MBO 14000+ - 395 13
Slide 15: Balance Sheet As On 31.03.2020
Particulars (in Rs Cr.) 31.03.20 31.03.19 31.12.19 Net Worth 687 1221 892 Borrowings 1210 791 1105 Capital Employed 1898 2011 1997 Inventory 1367 1216 1270 Balance Sheet Receivables 781 879 968 As On Creditors 1325 1239 1344 31.03.2020 Net Working Capital 823 856 893 Net Fixed Asset 502 549 505 Othe
Slide 16: Agenda
Strategic Investment Q4 & FY20 Results Update Agenda Covid Actions & Opportunities 15
Slide 17: Making AFL Stronger & Fit For Growth
Making AFL Stronger & Fit For Growth FY20 Portfolio rationalization Reset Debtors control – Trade Cost and Cash FY21 • Minimise cash burn through deep cost cuts across all elements Covid • Repurpose SS20 inventory to AW20. Cancellation of 60% of AW20 order to release cash • Rs. 660 Cr of non d
Slide 18: Focus Resources Behind Seven Strong Brands with Market Leadership Positions
Post Portfolio Rationalization, Focus Resources Behind Growing Seven Strong Brands with Market Leadership Positions #1 in Casuals Among Top 3 Denim Brands Among Top 5 Formalwear Brands #1 & #2 in Premium Casuals #1 in Prestige Beauty Brand with Strong Recall 17
Slide 19: Rest of the Brands - Business De-Risked & Resource Allocation Minimized
Rest of the Brands - Business De-Risked & Resource Allocation Minimized Strong actions to reduce burn Cost rationalization & team restructuring – Reduced cost base by 30% Changed sourcing strategy from seasonal to once in two months buy, improving sell through and optimizing inventory Network
Slide 20: Multiple Initiatives Implemented to Sharply Reduce the Fixed Cost Structure
Multiple Initiatives Implemented to Sharply Reduce the Fixed Cost Structure of the Company x 0.85x 0.6x Expense Runrate FY20 FY21 Structural Covid – Deep Cuts Structural – Rs 120 to Rs 150 Crs. Per annum Rental renegotiations / Lockdown waiver Optimization of store operating cost and closure of
Slide 21: Cash Release through Inventory Reduction
Cash Release through Inventory Reduction Key actions to deliver reduction in Inventory in Mar-21 compared to Mar-20 1. Covid related actions Repurpose SS20 inventory to AW20. Cancellation of 60% of AW20 to minimize order to release cash inventory Spring Summer 21 buy based on sales trends Powe
Slide 22: Scaling Up Digital
Scaling Up Digital Create ‘One view of inventory’ – Connecting offline inventory to online demand • Connecting demand from NNNow.com and third party marketplaces to the stores. Has accounted for more than 20% of stores sales for June • Enables reduction in discounts, higher inventory turns and bet
Slide 23: Getting Back to Growth With Improved Profitability and ROCE
Getting Back to Growth With Improved Profitability and ROCE Power Brands Specialty Retail Emerging Brands • Grow Through • Drive high growth and improved • Grow Calvin Klein in double digits profitability through profitably − Product Innovation ― Store expansion and Omni in − Channel Expansion GAP •
Slide 24: Unlock 1.0 - Opening up with Safety #1 Priority
Unlock 1.0 - Opening up with Safety #1 Priority Safety Measures & Guidelines at Safety Measures & Guidelines at Supporting Our Partners Office Stores • Periodic office sanitization • 50% employees coming to office on rotational basis • Well defined SOP • Set of 3 re-usable masks & in place at stores
Slide 25: Unlock 1.0 – Moved Swiftly to Restart Operations
Unlock 1.0 – Moved Swiftly to Restart Operations Smooth warehouse Launch of new categories Store opening operations post lockdown Innovative delivery models such as masks opening up Retail store Hyperlocal fulfilment centres • Click and collect • Quick to be off the block in opening the stores/ ma
Slide 26: June'20 Sales has reached 30% of Normal Month Sales
June’20 Sales has reached 30% of Normal Month Sales High Street Malls 545 675 440 Exclusive Brand 365 Stores Universe Open Universe Open Avg. Sales 60-65% 15-20% Sales - Own + 3rd Party: 1.2 times in June’20 Online Own online sales up 3X Slow pick up Departmental Stores Averaging 15% of last
Slide 27: Portfolio Well Suited for Changed Consumer Behaviour Post Covid
Portfolio Well Suited for Changed Consumer Behaviour Post Covid Product focus (1/2) • Given the leadership position in casual clothing, well positioned to take advantage of boom in casualwear • Portfolio of kidswear also well positioned to take advantage of improved demand for premium kidswear 26
Slide 28: Portfolio Well Suited for Changed Consumer Behaviour Post Covid
Portfolio Well Suited for Changed Consumer Behaviour Post Covid Product focus (2/2) • Range of products in the portfolio suited for work from home culture - Comfort wear, Innerwear, Essentials, DIY Beauty products and Footwear 27
Slide 29: Channel Focus
Channel Focus Online Focus channel for the year – Target double digit growth Malls currently underperforming Exclusive Focus on high street Improve sales through stores Omni & Hyperlocal Brand Stores Small town expansion fulfilment Parallely work on additional cost efficiency Department
Slide 30: Company Well Positioned to be a Dominant Player in the Medium Term
In spite of Covid Uncertainty in the short term, Company Well Positioned to be a Dominant Player in the medium term 7 strong brands with leading market positions to drive growth with improved profitability and ROCE As a leading Casual wear player, product portfolio well suited to ‘new normal’ co
Slide 31: Annexure
Annexure
Slide 32: Financials – P&L
Comparable P&L IndAS116 All Figures in Rs Cr. Q4 FY20 Q4 FY19 Q4 FY20 Revenue from Operations 710.5 1,169.0 710.5 Cost of Goods Sold 382.5 546.5 382.5 Employees' Emoluments 76.6 95.7 76.6 Others 343.6 441.6 261.2 EBIDTA (92.3) 85.2 (9.9) Financials – Margin Other Income (13.0%) 4.1 7.3% (1.4%) 41.8
Slide 33: IND AS 116 Impact Summary
IND AS 116 Impact Summary Impact on Income Statement (INR Crs) Particulars FY20 Q4 IND AS 116 applicable from 1st Apr 2019 and replaced existing Ind AS17 Lease Rent (Other Exp grouping) 348 82 No distinction between Financial and Operating Lease. All leases to be recognised in the Balance Shee
Slide 34: Thank You
Thank You