BackTitan’s covid-19 update reinforces recovery would be slow
So far, the company has reopened around 43% of its stores across businesses. Titan said sales in stores that have restarted are at around 50% of business in normal times
PremiumMUMBAI: Nobody expects consumer demand to recover in a jiffy in times of covid-19 even as lockdown restrictions are being eased. Within this, demand for consumer discretionary products would take longer to revive.
Titan Co. Ltd’s covid-19 update, issued late on Tuesday, reinforces this thought. So far, the company has reopened around 43% of its stores across businesses. Titan said sales in stores that have restarted are at around 50% of business in normal times. Indeed, this is a sharp decline but not unexpected a such in the backdrop of the covid-19 crisis.
“With the covid-19 led disruption, severe impact on business performance was anticipated, especially due to Titan’s extensive presence in malls, which were closed even before the lockdown," said analysts from Motilal Oswal Financial Services Ltd in a report on 27 May.
Having said that, some analysts are pleasantly surprised that Titan has managed to eke out even those sales.
The company derives a lion’s share of its revenues from its jewellery business. For the nine-month ended December, the segment accounted for over 80% of total revenues and therefore the covid-19 related impact is expected to be huge on financials.
Titan suspended operations from 17 March till the first week of May due to the lockdown.
One of the takeaways from the company’s update is that the June quarter will most likely be forgettable one. This year, ‘Akshaya Tritiya,’ an auspicious day for purchasing gold, fell in April and as a result Titan wasn’t able to capitalise on this. Plus, the wedding season, which is typically strong in the months of April and May was also subdued.
Titan’s shares were traded about 1% lower on Wednesday, a day when the Nifty 50 index gained by 0.8%. Note that the stock has corrected by a steep 33% from its highs seen in February on the National Stock Exchange, in keeping with deteriorating demand conditions.
Currently, the stock trades at about 47 times estimated earnings for this financial year, according to Bloomberg. To be sure, Titan stock’s valuations are pricey even after the share price correction seen in recent months. Plus, how demand pans out when all stores resume operations eventually is still uncertain. From a medium-term perspective, revival in demand is crucial for investor sentiment.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
