TBZ to triple retail store space in three years

Jewellery retailer Tribhovandas Bhimji Zaveri (TBZ) plans to add 30 more retail stores in the next three years and aims to tap more cities in its bid to become a strong pan-India player. TBZ currently has 15 showrooms in 9 cities across 5 states. 

“This financial year TBZ plans to open 12 outlets and  by financial year 2015, TBZ’s total retail carpet space will go up to around 150,000 square feet from current 51,000 square feet “ said Divyesh Shah, Group Head, Retail Business, in a post-earnings conference call on Tuesday..

The expansion will be funded via Rs 200 crore it raised recently through an initial public offering and internal accruals.

Many jewellers like TBZ have shifted to taking gold on lease, instead of outright buying as costs have increased following the sharp depreciation in rupee. The costs saved due to this shift to gold loans will also help fuel its future expansion, Shah said.

The company will incur 4-4.5% interest cost on gold loans. Entire gold inventory at all the new stores that the company opens will be leased, while existing inventory will also be slowly replaced.

Earlier on Tuesday, TBZ reported a net profit of Rs 16.3 crore for the first quarter, more than double sequentially, helped by lower finance costs among other reasons. Its revenue in April-June rose at a much slower 6% quarter-on-quarter to  Rs 283.5 crore.

"Last two quarters have been tough for the jewellery industry. Gold volumes are 30-40% lower for the industry. High gold prices and fewer wedding days during the quarter hurt sales," Shrikant Zaveri, TBZ's CMD said.

Also, Gudi Padwa, which is an auspicious day for Maharashtrians and accounts for around Rs 10 crore in sales, fell in Jan-March this year, while it was in April-June a year ago, Zaveri said.

Wedding days account for 50-60% of TBZ's total sales. The company sees a rise in industry volumes in the second half as the wedding season will pick up.

TBZ's EBITDA (earnings before interest, taxes, interest and depreciation) margin was at 10.4% and net profit margin was at 5.7% during the quarter.

It incurred finance costs of Rs 3.9 crore in April-June, compared with Rs 7.9 crore in Jan-March.The company has reduced discounts to boost bottom-line, Shah said.

Gold currently accounts for 75% of its sales and the rest 25% comes from diamonds. Company officials say demand for diamonds has been increasing and the proportion of diamonds in its overall sales will also go up in future.