MAM

Q1-2016: Titan ad spends up 30% at Rs 128.84 crore

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BENGALURU: Titan Company Limited (Titan) spent the highest amount in absolute rupees and in terms of per centage of Total Income from operations (TIO) towards advertisements in the quarter ended 30 June, 2015 (Q1-2016), during a 14 quarter period that has been considered in this report. The company?s ad spend in the current quarter at Rs 128.84 crore (4.8 per cent of TIO) was 29.8 per cent more than the Rs 99.25 crore (3.4 per cent of TIO) in Q1-2015 and 60.4 per cent more than the Rs 80.30 crore (3.2 per cent of TIO) in the immediate trailing quarter.

Note: 100,00,000 = 100 lakh = 10 million = 1 crore

Businesses and Brands

Titan has three revenue segments ? watches comprising the brands ?Titan, Xylus, Nebula, Sonata, Fastrack and Zoop; Jewellery with Tanishq, Zoya, Gold Plus from Tata, Mia and Fq teen diamonds; and ?Other? such as eyewear under the Titan EYE+ brand, apparel and eyewear also under Fastrack brand and precision engineering among others.

Segment Performance

Titan?s watches business in Q1-2016 recorded a growth of 9.1 per cent with income of watches business growing from Rs 444.19 crores to Rs 484.54 crores. The Jewellery income in Q1-2016 was Rs 2072.03 crores as against Rs 2325.27 crores, a decline of 10.9 per cent. The company says that jewellery business continues to face regulatory pressures that have an adverse impact on sales. Titan?s Eyewear business grew by 19.7 per cent from Rs 89.21 crores last year to Rs 106.77 crores in Q1-2016. The company?s other businesses including Precision Engineering grew by 36.3 per cent, to Rs 46.85 crores in the current quarter.

The companys says that it has put together plans to stimulate demand for all its product categories through innovative advertising campaigns and new product launches in the coming quarters.

Retail expansion continued with a net addition of 22 stores across all its businesses in Q1-2016, ending the period with a retail area of over 16.2 lakh square feet nationally. Titan?s retail chain is now 1223 stores strong, as on 30 June, 2015 and is expanding with growth plans in place for all its retail businesses ? watches, jewellery and eyewear.

Advertisement spend trends

Please refer to Fig A below. As mentioned above, during the fourteen quarter period starting Q4-2014 until Q1-2016, Titan?s ad spends were the highest in the current quarter, both in absolute rupees and in terms of percentage of TIO. Lowest ad spends in absolute rupees and in terms of percentage of TIO was in Q4-2103 at Rs 66.63 crore and 2.5 per cent of TIO respectively during the same period.

During the fourteen quarter period under consideration in this report, Titan?s ad spends show a linear increasing trend in terms of absolute rupees as indicated by the broken blue trend line, while ad spends in terms of percentage of TIO show a slow linear decline as indicated by the broken maroon line in Fig A.

Please refer to Figure B below. The company?s TIO in Q1-2016 fell 6.3 per cent to Rs 2708.59 crore as compared to the Rs 2891.44 crore in Q1-2015 but was 8.5 per cent more than the Rs 2496.19 crore in Q4-2015. During the fourteen quarter period under consideration in this report, TIO shows a linear increasing trend a indicated by the broken orange trend line in the figure below.

PAT in Q1-2016 at Rs 151.06 crore (six per cent margin) declined 14.8 per cent as compared to the Rs 177.27 crore (6.1 per cent margin) and was 29.8 per cent lower than the Rs 215.09 crore (9.6 per cent of TIO) in Q4-2015. PAT in absolute rupees and in terms of percentage of TIO (margin) show a linear increasing trend as indicated by the broken military green and broken grey trend lines in the figure below.

Company speak

Titan managing director Bhaskar Bhat said, ?The first quarter this year has been an extremely challenging one. Retail sales for both our core businesses watches & jewellery, have been below expectations due to reduced walk-ins. May and June, in particular were poor months. Rural demand too was affected due to lower realizations and monsoon conditions. With good monsoon in sight and festive season ahead, we look forward to a better year ahead. ?

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