Watch sales at Titan Co. Ltd, India’s largest watch and jewellery maker, have fallen 15-20% since the ban on large-value currency notes and could take about a quarter to recover, said a top company executive.
There are close to 8,000 multi-brand watch outlets run by dealers who largely buy and sell through cash. “They account for close to 45% of the company’s revenues for the watch division," said S. Ravi Kant, chief executive officer of watches and accessories for Tata Group-controlled Titan Co. Kant said he is in talks with big dealers to find a way out.
Overall, the watch and accessories unit, which brought nearly a fifth of its Rs11,177 crore revenue in fiscal 2016, has seen a dip of about 30-40% dip in the first 10 days following demonetisation, said Kant.
At luxury watch retailer Ethos Watch Studios, which sells brands like Rolex, Omega, Breitling and Rado, sales are recovering after a dip of 30-35% in the first 10 days after demonetisation. “The sales have started to pick up now because of the wedding season. However, it is still down by 15-20%," said Yasho Saboo, chief executive officer of Ethos.
According to Saboo, the real impact on sales will be known only six months later once the currency comes back into circulation. Moreover, there is also the implementation of the goods and services tax (GST) likely from 1 April. Sales were already impacted since 1 January with the government directive to produce PAN for all transactions above Rs2 lakh. For now, the company has kept its expansion plans on hold. “We will take three months to decide," said Saboo.
Titan also has 600 exclusive showrooms operated by the company and its franchises for its brands like Titan and Fastrack, which bring 45% of its revenues. These have fared relatively better with about a 5-10% dip in sales, said Kant.
Unlike Ethos, though, Titan will continue with its plans of new launches and advertising in the short term.
To be sure, even the mid-term outlook is challenging as demand at the mass-end for Titan watches below the price point of Rs2,000 continues to slide and the company phases out their production. “Outlook for watches continues to be subdued and in mid-single digit growth," said Kant. He added the premium segment and channels like department stores and e-commerce are growing much faster than the company-owned and dealer outlets though on a much smaller base.
For Titan, jewellery sales have also been impacted. “While revenues will be impacted in financial year 2017 and parts of financial year 2018, it can partly make up from higher margins as local gold prices are likely to go on a premium to global prices, and Titan can procure at global prices and sell at local prices," said a Credit Suisse report on demonetisation.