Titan slumps 6% as jewellery business sees sharp decline in sales in Q2

Shares of Titan Company slipped 6 per cent to Rs 1,178 on the BSE in early morning deals on Wednesday after the Tata Group company said that its revenue from the jewellery business could decline for the first time in the past four years in the September quarter (Q2FY20).

“The company’s jewellery division witnessed a sharp fall in sales after a sudden surge in gold prices dented the consumer demand from mid—June. The weakness continued during July too and resulted in considerable de-growth in sales during the month,” Titan Company said in quarterly update.

Even as retail sales declined in July, the retail growth -- between August and September-- was 15 per cent year-on-year (YoY) relative to the same period in the previous fiscal due to an enhanced level of promotions and schemes.

"Retail sales (secondary sales), therefore, grew by 7 per cent in Q2FY20, but revenues as per financials declined 2 per cent YoY in Q2FY20 substantially due to adverse impact of the hedges matured during the quarter," it added. CLICK TO READ PRESS RELEASE

Previously, Titan Company had posted a 32 per cent YoY decline in the jewellery business revenues during July-September quarter of 2015.

“For a business that has best top-line growth visibility in the large-cap FMCG/retail space (20 per cent CAGR in jewellery, the largest segment, over the next four years), has prospects of a continued EBITDA margin improvement because of high same store sales growth (SSSG) contribution and the likelihood of delivering a sustained RoCE improvement (from around 26 per cent in FY19 to around 35 per cent in FY21), the valuation premium is fully justified, in our view,” Motilal Oswal Securities said in company update.

In fact, increasing concerns about revenue and earnings growth for many consumer peers will also likely ensure high multiples for Titan, it added.

In the past month, Titan outperformed the market by surging 18 per cent, as compared to a 1.5 per cent rise in the S&P BSE Sensex till Monday. Despite today’s fall, the stock has rallied 27 per cent thus far in the calendar year 2019, as against a 4 per cent gain in the benchmark index.

At 09:45 am, Titan was down 5 per cent at Rs 1,200 on the BSE. A combined 2.76 million shares changed hands on the counter on the BSE and NSE till the time of writing of this report.

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