Pandemic & Rising Bullion impact on Jewellery Chains

Due to COVID-19 Lockdown, most of the Jewellery Stores were shut through June. In Jewelry segment, about 90% of the stores were open in July. For the leading brand, Tanishq, Retail sales in June recovered to 77% of last year’s levels followed by a strong recovery in July to 101%. Retail sales of studded jewelry stood at 59% of base month in June and 67% in July. Consumer sentiment towards gold has been fairly positive. Titan has witnessed some advancement of purchases for weddings. Rising Gold Price can also be attributed towards strength in Sales Numbers.

Management targets full recovery by 4QFY21. Festive demand in 3QFY21 should drive gifting and gold demand. The management has kept making charges fixed (on per gram basis) for some basic gold jewelry such as chains in view of competitive intensity. Making charges for most other jewelry items continue to be linked to value (% of sales). Margins for the year will also be lower due to weak top-line and associated negative operating leverage.

Local jewelers (especially in south India) became aggressive on promotions in June and July as they were sitting on low-cost inventory. Smaller players are seeing liquidity pressure and are unable to replenish inventory. TTAN has seen share gains in the past couple of months.

The eye plus division of Titan has been very slow in its recovery only 23% in June and 39% in July. Store count in July, however, dropped to 367 from 412 in June due to fresh local lockdowns (total store count is 569). The stores which were open witnessed recovery rate of 85% of last year.

In watches, Trade channels were hit badly. Recovery rate was highest in ecommerce and lowest in Large Format Stores that are primarily located in malls. TTAN is working on initiatives to drive gifting demand especially around milestone days. The company is working on several lead generation initiatives to drive sales in the segment.