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Growing Pains – Industry News
Pritesh Asher, co-founder and CEO of Juicy Chemistry, is struggling to grow his business and become profitable. But he is facing high customer acquisition costs (CAC). “The cost of acquiring a customer is extremely high even today,” he admits. “As you spend more, CAC continues to rise because you acquire each incremental customer at a higher cost. As a share of revenues, Juicy Chemistry’s advertising and promotion (A&P) spend was 52% in FY23, up from 20% in FY20. In the highly competitive D2C space of the beauty and personal care market, Asher is not alone.
Shankar Prasad, founder and CEO of Plum, recognizes that sometimes his company relies on discounts to drive sales. “If everything is on sale, you can’t stay out of the party”, he argues, adding that the company, in itself, does not believe in discounts to increase sales. Although Plum reported revenue of Rs 310 million in FY23, growing 4x in the last three years, its operating margin was negative.
Like Anand Ramanathan, Partner (Consumer Products), Deloitte India, points out, D2C companies often prioritize rapid customer acquisition and invest heavily in A&P. “Their model depends on premiumization and higher revenues per customer. In some cases, A&P expenses as a share of sales exceed gross margin,” he explains. The tall marketing costs are making expansion difficult, says Ramanthan.
In fact, Nikhil Sethi, partner at KPMG, notes that if a D2C wants to grow, it must incur costs. “We need to reach the second tier of customers who don’t have as much purchasing power. Furthermore, maintaining quality while scaling operations is very difficult.”
Some are managing to grow quickly. Minimalist co-founder and CEO Mohit Yadav says his business has been growing 100% annually for the past three years and is profitable. “We don’t believe much in terms of leveraging price growth. Instead, we focus on more innovation and finding gaps that can be exploited,” Yadav told FE. Prasad feels that operating in the price range of `400-600 has helped. “We have also increased our prices so that packaging in smaller weights is available,” he says, adding that some variants are a little more affordable than the rest of the range.
However, an analysis by Amit Sachdeva and Anurag Dayal, HSBC Global Research, of eight popular digital first and new age D2C brands, reveals that average A&P spend – as a share of sales – increased from 28% in FY20 to 39% in FY23. “Despite this, business expansion has been below average, with all but two unable to deliver positive EBITDA in FY23,” they point out. All but one company reported a net loss. “A high CAC means only a few are likely to scale, become profitable, and be available across channels. Subscale brands will have difficulties”, they opined. The brands studied, such as Juicy Chemistry, Plum, Sugar, mCaffeine, Kama Ayurveda and WOW, have existed for between nine and 22 years.
Some newer brands, such as Foxtale, which operates at the lower end, have grown rapidly but remain loss-making. Founder and CEO Romita Mazumdar says the company has managed to reduce marketing costs and is confident it will become profitable this year. Asher says discounts have been reduced from 30-35% to around 15-18%. “I think gross margins are stabilizing and we should have positive EBITDA in the next 8 to 12 months. The challenge, as EY partner Angshuman Bhattacharya notes, is to build distribution, given the fragmentation of general trade, beauty stores and cosmetics stores. “They are discovering that creating a physical network is a much slower and more time-consuming process than doing it online. It requires a huge investment in the sales team,” says Bhattacharya.
Deloitte’s Ramanathan says many D2C brands are opting for an omnichannel approach to reach a larger audience. “While there are benefits, it’s too early to say for sure whether it’s paying off for everyone, because managing online and offline channels adds complexity and can increase costs.” “Staffing in stores and managing inventory across multiple channels requires careful planning,” he points out. Asher from Juicy Chemistry says his company has a near-perfect conversion score in stores while online, conversion rates typically hover between 4-6%. On the other hand, Plum’s Prasad says conversion is better online. “In a retail store, they look at your product in a multi-brand environment, whereas online they only look at your product,” he explains. Brands like Minimalist have built a network of 500 to 600 stores that, according to Yadav, contribute 8 to 10% of revenue.
While there are some success stories, EY’s Bhattacharya expects consolidation where interesting D2C brands are acquired by large personal care companies. “This would create a perfect match between the agility that DTC brands bring and the financial and distribution power that large companies possess,” he notes. For example, MaricoOwned Beardo has increased its sales by 3x since FY21 and turned Ebitda positive in FY24. Large-scale platforms like Nykaa could also be buyers. KPMG’s Sethi believes that those “D2C beginners Founders with differentiated propositions are now increasingly willing to run them as independent small businesses rather than IPO or strategic sale as an end life”. These would be content with lower revenues, although with good margins. But others can be acquired by large platforms looking for brands with a strong proposition.
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Latest news on July 11, 2024: Airtel says its new Xstream Fiber plans bundle over 350 live TV channels (Official Photo) (Reuters) Disclaimer: This is an AI-generated live blog and has not been edited by Hindustan Times staff.
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Thu, 11 Jul 2024 08:44 PM
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Thu, 11 Jul 2024 03:51 PM
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Thu, 11 Jul 2024 03:09 PM
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Thu, 11 Jul 2024 02:39 PM
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Thu, 11 Jul 2024 07:59 AM
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Thu, 11 Jul 2024 07:45 AM
Business News LIVE Updates: US stock markets at record highs led by world’s biggest tech companies
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News / Business / Latest Business News Live Updates Today, July 11, 2024
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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