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ICICI Securities Report
We like the continued outperformance in Kewal Kiran Clothing Ltd.'s Killer franchise and the visibly higher aggression towards retail expansion in this format.
Even though meaningful improvement (18% YoY versus 9% YoY in Q2 FY23) in realisation is encouraging (benefits of price hikes and mix improvement), underperformance in volumes (down 2% YoY versus 18% in Q2 FY23) is a matter of concern.
We understand that the price hikes executed by Kewal Kiran (especially in jeans, which account for ~50% of sales) have been competitive (lower than the top competition, e.g. Levis, Pepe, etc.).
As a result, operating margins were impacted (gross margin remains below pre-Covid levels). However, we believe this situation will also enable Kewal Kiran to gain market share from the competition.
Expansion of exclusive brand outlets continues to be aggressive (~28-30% growth) primarily led by the Killer brand. Operating margins remained healthy during the quarter.
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