RBZ Jewellers Q1 FY27 earnings call

RBZ Jewellers reported a robust Q1 FY27, with revenue from operations growing 60% year-on-year to INR 121 crores. EBITDA increased 39% YoY to INR 18 crores, resulting in an EBITDA margin of 14.9%. Profit After Tax stood at INR 9 crores, representing a PAT margin of 7.5%. The company's retail revenue surged 70% YoY to INR 78 crores, while wholesale revenue (calculated at INR 43 crores) grew 47% YoY, demonstrating strong performance across segments.

The company is undergoing a significant transformation towards a retail-led business model, aiming for a 50-50 B2B to B2C revenue mix within 1-2 years, ultimately targeting 75% retail contribution in the long term. This strategic pivot is driven by the higher profitability from retail and the identified 'white space' in the organized jewellery retail market across Gujarat, Rajasthan, and Madhya Pradesh. Management believes this shift will lead to a major leap in growth and enhanced profitability.

RBZ Jewellers plans to open four new stores in FY27, with Surat launching in Q2 and Rajkot, Maninagar, and Gandhinagar scheduled for Q3. Large format stores are expected to require INR 125-150 crores in inventory, while mid-format stores will need approximately INR 50 crores. The company anticipates these new stores to achieve breakeven within one year or less, reflecting confidence in their expansion strategy and market potential.

To mitigate gold price volatility and reduce interest costs, RBZ Jewellers is implementing a strategy to hedge its entire inventory using Gold Metal Loans (GML) over the next three years. GML offers a significantly lower interest rate of 3-3.5% compared to the current 9% interest on traditional loans, providing a 5.5% interest saving. This strategy is expected to make the business more fundamentally sound and improve debt leveraging capacity.

Despite strong top-line growth, Q1 EBITDA margins were 14.9%, impacted by several factors. Management attributed this to stagnant average gold rates leading to negligible inventory gains, and significant pre-opening expenses for new stores. These expenses included INR 76 lakhs for lease asset amortization, INR 115 lakhs for lease liabilities, higher employee costs for 52-60 new hires, and increased marketing and stock planning activities, which were accounted for in Q1 to spread out the impact.

The company is adapting to evolving consumer preferences, particularly the demand for lighter-weight jewellery. While 22-carat gold remains dominant in their occasion wear category, RBZ Jewellers has introduced 18-carat designs since December, aiming for at least 20% of corporate sales to be 18-carat by the end of FY27. This demonstrates agility in product development and a focus on design aesthetics to cater to specific market segments, without venturing into daily wear.

In Q1 FY27, the company utilized approximately 50% of its 1.8-2 tons/year manufacturing capacity. Management expects this to increase significantly to 70-80% minimum, and potentially up to 90%, during the festive seasons of Q2 and Q3. This anticipated rise in utilization is driven by strong order backlogs from both retail and corporate segments, indicating efficient operations and readiness to meet seasonal demand.

RBZ Jewellers is making substantial investments in brand building and marketing, particularly for its upcoming mega stores in Surat and Rajkot. This strategic expenditure is aimed at establishing a robust brand identity that will make future franchising opportunities more lucrative. Management views this as a long-term vision for scalable growth, ensuring the brand's strength before expanding through a franchise route.