Covid 19 pandemic causes Titan Company Ltd to report a loss in Q1 FY 2020-21
The disruption caused by the Covid 19 pandemic in India affected the performance of Titan Company Ltd severely with retail outlets closed for a major part of the quarter, resulting in a decline in income of 62% for the first quarter of financial year 2020-21 with the total income declining to Rs.1,901 crores, against last year’s income of Rs. 4,995 crores during the same period. Revenues included sale of bullion worth Rs. 601 crores done to reduce inventory given the low level of sales due to the disruptions in activity.
The lockdowns impacted the Company’s operations significantly in the months of April and May 2020 as most stores were forced to shut down. While stores started opening in May, post Unlock 1.0, even as at end of June 2020, only 83% of all the stores opened and even for stores that opened, many of them were not operating for all days.
The recovery rate of revenue started improving slowly and as of June it was 21% for the Watches and Wearables division, 77% for the Jewellery division and 25% for the Eyewear division. Consumer sentiment was impacted severely due to the economic downturn, people being forced to remain indoors for extended periods of time as most people worked from home and the perceived risk of going out to public spaces. Further with most weddings in the quarter being postponed, demand for wedding jewellery was affected.
With the negative consumer sentiment prevailing in the quarter, discretionary spends were very low, and specifically impacted our Watches business and diamond studded jewellery in the Jewellery business. Plain gold jewellery sales, however, recovered better than expected in June despite high gold prices. However, the impact of the lockdown resulted in the jewellery division recording an income of Rs. 1;783 crores for the quarter as compared to Rs. 4,047 crores last year, a decline of 56%. The Watches business was impacted far more and recorded an income of Rs.75 crores against Rs.715 crores in the previous year, a decline of 90%. The Eyewear business also was impacted as severely as the Watch business with revenues declining by 80% in the quarter, recording an income of Rs.30 crores as against Rs.149 crores last year. Other segments of the Company comprising Indian dress wear and accessories recorded an income of Rs.4 crores compared to Rs.36 crores in the previous year, a decline of 89%.
Consequent to the decline in revenues, despite a company-wide cost reduction initiative and cuts in advertising spends given the low level of activity, the Standalone PBT for the quarter was a loss of Rs.335 crores, against a profit of Rs.523 crores in the previous year.
The Company’s retail chain stands at 1,736 stores, as on 30th June 2020 with a retail area crossing 2.2 million sq.ft. nationally for all its brands.
Of the subsidiaries, Titan Engineering and Automation Ltd (TEAL) did well despite the pandemic with revenues of Rs 76 crores (decline of 19%) and Profit before tax of Rs. 7 crores (decline of 51%). CaratLane, being in the consumer discretionary space was hit by the pandemic and ended with a revenue of Rs 42 crores (decline of 68%) and a Net Loss of Rs. 19 crores for the quarter.
Mr. C K Venkataraman, Managing Director of the Company stated that “The severity of the disruption in business due to the pandemic impacted the Company’s performance resulting in an unprecedented loss for the company. The recovery in business, particularly in the jewellery business is encouraging and we expect to get back to normalcy by the fourth quarter of this year. The company’s reassessment of its cost structure during this period and inherently strong Balance Sheet, will help it to create a stronger base for a sustainably higher profit margin business.”
