Retail Sector
Important note - Still Indian Markets are directionless and indecisive due to which any further market correction may bring some more pressure on all researched stocks mentioned in following subsections.
The market volatility situation is for short term duration and in long term the markets will recover as Indian companies are having good fundamentals and good growth prospects.
Taking into consideration current market situation it is advisable to buy stocks in steps rather than buying in bulk in single trade.
Koutons Retail India
Returns
CMP - Rs. 544
Buying Price - Below Rs.500
Returns - 30 to 50%
Duration - 2 to 3 years
Unique business strategy
Koutons’ franchisee model is different from its peers as it offers its franchisee minimum guaranteed payments covering lease rentals, employee costs, and other establishment costs apart from incentivised sales. Products are consigned to the franchisees, who not bear the inventory risk expect for pilferage - the risk of unsold stock remains with Koutons.
The company collects a security deposit (bearing nominal interest rate) from the franchisee towards the apparels that the later stocks at the outlet. This model is highly attractive for franchisees who seek security and low investment, which is reflected in the rapid ramp up as well as the fact that franchisee churn rate has cumulatively been less than 1.5 per cent since inception.
Manufacturing facilities
1. Koutons has manufacturing capacity of 12.36 million pieces per annum and finishing capacity of 22.92 million pieces per
annum with 18 in-house manufacturing/finishing units and 14 warehouses spread across Gurgoan.
2. The company plans to shift 7-8 of its smaller manufacturing units to an integrated unit at Gurgoan panning 4.5 lakh square
feet by April 2009. This move would improve production efficiencies and reduce the lease rental costs (Rs.4-5 crore per year),
which increase to the tune of 10-15 per cent every three years.
3. Also, with the arrival of VAT and rationalization of sales taxes, the company would be setting up warehouses in the eastern
and southern part of India as well, which would further improve its logistical capabilities.
Expansion Plans
1. In FY2008, the company introduced a line of women’s and kids wear under the Les femme and Koutons junior brands
respectively through its existing outlets taking into consideration 58% of the 20,000 crore apparel market consisting of ladies
and kids wear where margins are higher than those in the men’s segment.
2. The company plans to open 100 EBOs (Exclusive Brand Outlets) each under both these brands Les femme and Koutons
junior brands in FY09 and double that number to 200 each in FY10.
3. Koutons would be enlarging its product portfolio in FY09 by adding categories like accessories and handbags for women
along with belts and shoes for men with a view to increase the footfalls in the outlets and thereby assist cross-selling.
4. Koutons recent announcement to enter West Asia by the end of 2008, whereby it plans to open 30 EBOs each of Koutons
and Charlie brand, should provide the company with global visibility.
Concerns
1. Due to the nature of its business, Koutons finds large sum of money blocked up in the form of working capital in FY08,
working capital amounted to almost 68 per cent of annual sales.
2. Competition in the retail apparel segment is growing up.
Stock Market Indian
Welcome to the Indian Stock Market
Your Way To Earn
Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but www.stockmarketindian.com does not warrant or guarantee their accuracy or date.
www.stockmarketindian.com takes no responsibility for any investment decisions based on recommendations provided on website.
Financial contents like Technical charts, historical charts and quotes are taken from NSE and Yahoo sites.
Note - All quotes are delayed by 15 minutes and unless specified.
Please read at www.stockmarketindian.com/disclaimer.php before using any material or advice given at www.stockmarketindian.com
Copyright © 2009 Stockmarketindian.com. All Rights Reserved.
About Company
1. Koutons Retail India, an integrated apparel manufacturing and retail
company to grow at a sizzling rate; up from 74 stores in FY05 to
1,175 stores in FY08. The company intends to capitalize on the
buoyancy in the organized retail sector, which is expected to grow
at a CAGR of 40 per cent for the next two years, partly helped by
doubling the number of stores by end of FY10. Foray into the
women’s and kids wear segment, acquisition of regional brands and
entry into international markets should provide the next leg of growth
to the company and enable it to sustain high margins.
2. Koutons provides a complete range of men’s apparel under the
brands Koutons and Charlie Outlaw.
3. Koutons is amongst the largest branded apparel manufacturer and
retailer with a reach in 450 cities across India.
(Updated - Dec 2008)
