Fashion segment grew in double-digits on a base of 18-20%: Mr Kishore Biyani, CEO, Future Group

Update on the Indian Equity Market:

On Wednesday, NIFTY closed up with 0.5% gain at 11,844. GAIL (+6.3%), Grasim (+3.6%) and SBI (+3.5%) were the top NIFTY50 gainers. Infratel (-5.2%), Yes Bank (-3.6%) and Cipla (-2.1%) were the top NIFTY50 losers. Among the sectors, NIFTY PSU BANK (+3.7%), NIFTY IT (+1.4%) and NIFTY FMCG (+1.0%) were the top performers while NIFTY MEDIA (-0.6%), NIFTY REALTY (-0.5%) and NIFTY AUTO (-0.3%) were the top losers.

Excerpts from an interview with Mr Kishore Biyani from Livemint on 30th October 2019:

• Festive demand starts in August sometime with Onam for Kerala and that did quite well. Followed by Puja in the Eastern part of India which again did very well. Dussehra in some parts of India also did well.
• Diwali started a little late and the business picked up from September and till now they have been seeing some very good traction on Diwali also, but it picked up late.
• They deal in food, fashion as such. For food, the consumption continues. It is all about some category shifts here and there. Fashion surprisingly has done well for them.
• Men’s fashion has changed significantly in terms of what a man is wearing and after a while, the change has come in. So, change is making fashion drive that business. Value fashion has done well.
• Central has done phenomenally well which is a departmental store format which has achieved its numbers.
• Women’s fashion has been a little slower than what it used to be last year and they are seeing some shifts in footwear also.
• With the wedding season starting November onwards, they expect to see a lot of shifts which are going to happen. This summer, weddings were much slower, so any category which was related to wedding had seen some kind of sluggishness, whether it was personal care, beauty, footwear —anything related to the wedding saw some moments which were much slower than expected.
• The larger ticket size items definitely, which we are hearing in terms of auto sales, real estate sales, consumer durables have held on onto some categories, again some categories have seen some slowdown there, but in smaller ticket items also we are seeing some variation.
• Fashion has done very well in 2018. So they are looking at a huge base of growth of 18-20%, but fashion would have grown in double-digits in 2019 for them.
• Non-fashion, food in the first quarter grew quite well. Second-quarter has been little lower than Q1, but nevertheless, the growth continues.
• Foodhall is breaking even and Foodhall, in fact, has probably done better. Now they have three Foodhalls in Mumbai and four in Delhi. This festive season Foodhall has done brilliant numbers because of the gifting backlog they had. A lot of gifting orders they had picked up this year.
• ₹650 crore of extra EBITDA in Future Retail definitely helps in the long term to build a very strong balance sheet.

Consensus Estimate (Source: market screener & Investing.com website) 

Future Retail:

• The stock price was ₹ 383/- as of close price of 30th October and traded at 22x /23x /20x the consensus EPS for FY20E / 21E / 22E of  17.4/ 16.9/ 19.5 respectively.
• Consensus target price of ₹ 560/- implies a Price to earnings multiple of 29x on FY22E EPS of ₹ 19.5/-.

Future Lifestyle Fashion:

• The stock price was ₹ 410/- as of close price  of 30th October and traded at 38x /31x /28x the consensus EPS for FY20E / 21E / 22E of Rs 10.8/ 13.5/ 15.0 respectively.
• Consensus target price of ₹ 555/- implies a Price to earnings multiple of 37x on FY22E EPS of ₹ 15.0/-.