Titan may clock heavy losses in Q4 as people postponed weddings⁠— investors now await management guidance

• Titan is set to announce its fourth-quarter results tomorrow (June 7) for the quarter ending March 2020.
• The company experienced a 5% drop in sales of its jewellery division for the January-March quarter.
• This time around, not only are their stores shut due to the lockdown for over a month; many people have postponed weddings.
• “Consequent to the serious disruptions in operations in March, revenue growth for the quarter and consequently for the year has been impacted severely,” the company said.

India’s top fashion accessories manufacturer Titan is set to announce its fourth-quarter results on June 7 for the quarter ending March 2020. Although the coronavirus lockdown period was just for one week in the relevant period, it is already known that the company experienced a 5% drop in sales of its jewellery division for the January-March quarter.

The company also witnessed a 20% drop in the eyewear segment. However, the watches and wearables division grew by 1% for the quarter, despite significant loss of sales in March.

This time around, not only are their stores shut due to the lockdown for over a month; many people have postponed weddings. It affects the jewellery and watch-maker greatly as 35% of its annual sales come from weddings.
Titan itself has admitted this. “Consequent to the serious disruptions in operations in March, revenue growth for the quarter and consequently for the year has been impacted severely,” the company said in its quarterly update.

And the business was going good until the Great Lockdown and Covid-19, disrupted it, the company said.

But it’s not just wedding business that it stands to lose. Going ahead, fewer people will care to buy jewellery for occasions or otherwise. As a result, Titan’s share price plunged over 16.13% since the beginning of the year.


“We believe the disruption being caused by the COVID 19 driven lockdown is not transient in nature and could have a prolonged impact on discretionary demand growth over the medium term,” said Goldman Sachs report dated April 22.

Moreover, Titan businesses will offer lower returns due to weak sales. The report expects Titan to optimise costs through lower ad-spends. In spite of that, it still expects its jewellery profit margins to decline to 10.3% in FY21 from 11.3% in FY20E due to operating leverage.

“We expect the current uncertain macroeconomic environment will lead to lower consumer expenditure on weddings over the next few quarters,” cited the Goldman Sachs report.

“Indian jewellery demand has a positive correlation with real GDP growth,” the report said. The research firm forecasts Indian GDP to grow at -0.4%, indicating Titan’s sales will remain muted for the next two years.

Titan while deferring the launch of two its jewellery collections for the time till most of the stores are open said, “These are early days, and 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.”

SEE ALSO: Without weddings and fewer Indians in a celebratory mood, Titan’s sales to remain muted for the next 2 years

Titan says Covid-19 has a 'severe' impact on its Q4 revenues