Titan defers launch of jewellery collection

After taking hit on its revenues due to the ongoing lockdown in the country, Titan Company – the largest organised jewellery retailer in India, has deferred the launch of two of its jewellery collections till a time that most of the stores are re-opened.
The announcement prompted negative response from investors, leading to a 2.81% fall in its share price to Rs 868 on the NSE.
Titan’s operating cash flow in the last two months was negative due to ‘virtually zero’ sales during the first six weeks of lockdown.

Sharing its business update amid the Covid-19 pandemic, the jewellery-to-watches maker said that increase in mark-to-market cash outflow on gold hedge due to rising gold prices and committed costs being incurred also contributed to the negative cash flow. However, it expects this cash outflow to be recovered when sale of jewellery restarts.
The Bengaluru-headquartered company said it has opened around 43% of its stores across all businesses till date, all the mall stores continue to be closed.

Titan said the sales in stores that have opened up are at around 50% of that in normal period, but the situation is improving gradually.
Given the early days of resuming operations the company is not in a position to gauge with certainty the future impact on operations but expects normalcy to be achieved only after a quarter.
According to Titan, customer sentiment to reduce spends on discretionary items is also likely to impact demand for most of the company’s products including watches, jewellery, perfumes and accessories.

While manufacturing activities have restarted gradually in most of the facilities, production ramp up will be based on current inventory levels and the Company‟s estimate of demand. On the supply side, vendors have re-started their production and are ready to provide required supplies.
Ace investor Rakesh Jhunjhunwala had reduced his stake in the company during the March quarter by over one percentage point, or 10.3 million shares.

Net net the management is looking at a cautious outlook ahead in FY21 considering the fact that April & May are traditionally very strong months for the company which have now been lost. Also the marriage wedding season which is a big contributor to Titans revenues is unlikely to recover soon going ahead.

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