Over the years, Titan has transformed itself from a watchmaker to a lifestyle company, with jewellery being the leading vertical contributing to 85% of revenues. During the pandemic, with restrictions on large gatherings and a slowdown in discretionary spending, sales had been heavily impacted. 

Q1FY23 was the first “normal” quarter with no restrictions, and Titan has reasons to celebrate.  Titan’s quarterly results reflected a strong festive/wedding season and normalcy after a gap of two years, with the jewellery business registering its second highest ever quarterly revenues in Q1FY23.

Quick Takes

• Revenue in Q1FY23 stood at Rs 9.487 crore, a YoY growth of 170%, compared to Rs 3,519 crore in Q1FY22 (excluding bullion sales) 
• The company has posted its highest ever profit of Rs 1,066 crores (before taxes) in Q1FY23, compared to Rs 82 crores in Q1 FY22
• Watches and wearables business reported its best quarterly revenue of Rs 785 crores with 169% growth in Q1 FY23 compared to Rs 292 crores in Q1 FY22
• EyeCare business also reported its highest quarterly revenue of Rs 183 crores with 173% growth in Q1FY23 compared to Rs 67 crores in Q1 FY22
• Expansion of stores across brands and segments in Q1FY23

All segments grew YoY by a large margin in Q1FY23

Comparing Titan’s Q1FY23 results with the same quarter a year ago is tricky. Q1FY22 was one of the worst affected quarters during the pandemic and any comparison with Q1FY23 is on the low base of last year. While Q1FY22 was highly impacted,  subsequent quarters generated much higher revenues, resulting in FY22 seeing the company’s highest ever annual revenues. The current results, if anything, are pointing towards Titan surpassing revenues of FY22 in FY23.

Revenues in Q1FY23 were Rs 9,487 crore, up 170% YoY, while net profit YoY was up 38 times to Rs 785 crore. Titan managed to surpass Trendlyne Forecaster’s revenue and net profit estimates by 1.7% and 1%, respectively.

Jewellery verticals profits (before tax and interest) increase YoY by 5X

Titan’s jewellery vertical reported an EBIT margin of 13.5% in Q1FY23. The margins in Q1FY23 had 80-90 bps gains from higher diamond prices and spot gold purchases and these might extend over the next two quarters as well. Sales during Akshaya Tritiya rebounded strongly after a three-year gap. Gold and studded jewellery both grew by about 260+% YoY. Titan’s regionalisation strategy in key focus markets (regions where it has a lower market share than its national average) is bearing fruit with higher market share gains in the southern and eastern regions.

The wedding jewellery segment recorded a healthy growth of 178% YoY, though its contribution to the overall sales was marginally lower. Golden Harvest, a scheme which allows the customer to pay for jewellery in instalments, saw enrolments rising vis-à-vis buyer growth, a positive sign for buyer intent. 

Watches and wearables vertical record highest quarterly revenues with higher ad spends

The watches and wearables vertical recorded its best ever quarterly revenues on the back of healthy growth across channels and brands. Growth in all channels came off a low base of Q1FY22 (except e-commerce). Wearables grew nearly five times YoY due to the addition of new products. This was aided by advertising spends across brands and categories of Rs 67 crore.

The EBIT margin improved to 13.1% , the best over several quarters post-Covid, due to a better brand and channel mix with strategic positioning of mass brands like Fastrack in tier-2 and tier-3 cities and the high end watches via Helios in metros. Online sales contributed to 19% of total sales in this vertical.

Eyecare posts highest quarterly sales with addition of new stores

The eyecare vertical achieved its highest quarterly revenues of Rs 183 crore in Q1FY23 led by growth in all its major categories. 56 new stores were added in this quarter taking the total count to 789 stores. Prescription eyewear retail by Fastrack, a new initiative by Titan EyeCare, expanded its reach with the addition of two new brand stores in Bengaluru, targeted at the youth segment.

Among the other business verticals, Fragrances and Fashion Accessories (F&FA) had a 275% YoY growth driven by healthy growth in modern trade and e-commerce. In Fragrances, Brand SKINN tapped into the premium segment with the launch of ‘SKINN Nox’ in both Homme & Femme variants. Taneira’s sales grew 608% YoY on a low base. It continued to expand its national presence adding 6 stores in Q1FY23 and is now present in 11 cities including all four metros. 

CaratLane (a subsidiary of Titan) continues to deliver healthy growth with revenue of Rs 482 crore with a 6.9% EBIT margin. In terms of store addition, it added six stores in Tanishq taking the total count to 395 and 13 Mia stores with a total count of 63 along with five CaratLane stores with a final tally of 143 stores.

Both watches and eyewear had a good sequential recovery, up 26% and 37% QoQ respectively. In watches, growth continues to be good in the wearables category. The company added 26 World of Titan stores and 15 Helios stores. In eye care, 56 new stores were added.

Management remains optimistic about growth targets

In the post-results conference call, the management said that the increase of customs duty will generate inventory gains in the next two quarters. Its jewellery market share has increased to 6%-7% from 3%-4% over the last three years. The management clarified that making charges will continue to remain at a premium to competitors. The management remains bullish on the outlook for jewellery growth and targets a revenue CAGR of 20% in FY23.

Digital sales contribution stands at 6% in Q1FY23. Titan has an aggressive expansion plan to open 50 (on average 35-40) Tanishq stores in FY23. Wearable revenues form less than 10% of total revenue and are rising on a QoQ basis. 

Titan is likely to continue its long-term growth story with the jewellery vertical gaining market share from store expansion, focus on regional jewellery preferences and jewellery hallmarking benefits. The strategy of expanding both online and offline stores in jewellery, watches and eyewear, and investments in newer brands like Caratlane, Titan Eye+ and Taneira should result in higher contributions from these categories. 

Entry into high growth and higher margin segments like wearables such as smart watches, headphones and wireless earphones are expected to play out over the next few quarters. It should come as no surprise if Titan ends FY23 beating FY22 across most metrics.