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The ongoing strike by jewellers is set to impact March 2016 quarter numbers for listed companies such as Titan, PC Jewellers (PCJ) and Tribhovandas Bhimji Zaveri (TBZ), among others. The actual revenue impact, however, will depend on various factors including the number of stores that were closed during the strike (shop-in-shop stores remain open) and the proportion of domestic sales in overall revenues.
Meanwhile, South-based jewellery stores had backed out from the strike after supporting it initially, so they may not feel the heat.
Analysts, though, have done some rough calculations. Abneesh Roy, analyst at Edelweiss Securities, says, “We have still not done our preview numbers but obviously this quarter will be quite tough because pre-budget as well buyers were postponing decision and post Budget obviously jewellers' strike is going on. So, we believe there will be about 40 days’ revenue impact for most jewellery companies in the quarter. Though some stores remained open, we believe footfalls must have been limited."
Companies, too, are worried. Divyesh Shah, Business Head, TBZ, says, "Impact of the strike will be significant in the month of March. Though we will pass on the 1% excise duty to consumers and will not see revenue or margin impact from the duty."
“We have done some back of the envelope calculations to assess the revenue impact in March quarter. So far, the strike has been on for 27 days (since March 1) — so, companies will hypothetically lose revenues for 27 days in a 93 day-quarter. Post annualising the nine-months FY16 jewellery revenues of the three companies (and extrapolating the estimated revenue for March quarter), Titan could lose Rs 665 crore worth revenues in the March quarter due to the strike, which is after considering the fact that jewellery forms about 80% of its revenues; rest comes from watches and other segments. This number works out to Rs 135 crore for TBZ and Rs 371 crore for PCJ's domestic retail business. PCJ derives about 70% revenues from domestic retail segment with rest coming from exports. It does not have presence in shop-in- shop stores and all of its exclusive domestic retail stores are closed due to the strike. Since jewellery is the most profitable segment for the companies, the impact on profit will be amplified.”
Managements of Titan and PCJ declined to comment for the story.
Surprisingly, these stocks have surged since the Budget. While one reason could be the sharp fall ranging 16-27% seen in the month of February, the other could be the rise in broader markets. The gains, however, are lesser than the fall in previous month.
Analysts, however, expect the share price gains to reverse once March 2016 quarter numbers are declared, while adding that Gudi Padwa and other festivals lined up in April could provide some cushion.
