Titan Q2 profit drops 40% on lower jewellery business

BENGALURU: Titan reported a 40% fall in quarterly profit, as the maker of namesake watches and Tanishq jewellery continued to reel under the impact of closure of the Golden Harvest Scheme, its main revenue generator.
Profit after taxes to Rs 145.39 crore, for the second quarter ended September 30, from Rs 239.98 crore, a year earlier. Operating revenue dropped 25.5% to Rs 2,654.70 crores.
In the year earlier quarter, forced premature redemption of the old Golden Harvest Scheme resulted in a one-time growth of 65%, with GHS contributing about 54% of the revenues. Net sales from jewellery dropped 32.3% to Rs 1,981.73 crore during the second quarter.
“This was an extremely challenging quarter for the company…the jewellery business had a difficult quarter with a decline over last year,” managing director, Bhaskar Bhat, said.
Bengaluru-based Titan previous GHS was hugely attractive to customers but the company was forced to wind it down last July after certain rules in the Companies Act, which came into effect 1st April, 2014, termed these as public deposit schemes.
“The industry saw a tough period with gold imports declining significantly. The decline in jewellery sales was also on account of discontinuation of our Golden Harvest Scheme,” Bhat added.
The company said retail sentiment remained “extremely poor” in the reported quarter hurt by lower footfalls in its stores and a delayed festive season. However Titan expects growth to return from the third quarter due to the onset of Dusherra and Diwali.
Chief financial officer Subbu Subramaniam told analysts in a conference call that the company has seen 20% rise in Dusherra sales compared to last year. “We expect revenue from the new GHS scheme of Rs 400-450 crore be accretive from the fourth quarter,” according to Subramaniam.
Backed by activations by Titan and Fastrack, watches business grew 4.4% to Rs 546 crore and eyewear business grew 15.3% to Rs 88 crore.