Weaving Wamsutta in portfolio is a ‘gamechanger’, says Indo CountMutual FundWeaving Wamsutta in portfolio is a ‘gamechanger’, says Indo Count

Weaving Wamsutta in portfolio is a ‘gamechanger’, says Indo Count


With this acquisition, Indo Count not only joined the ranks of renowned names in specialty and departmental stores across the US, but has also positioned itself alongside well-known labels such as Royal Velvet and Fieldcrest, said Kailash Lalpuria, executive director and chief executive officer, Indo Count.

“Indo Count has been upgraded from a national brand existing in specialty and department stores to the upper scale segment,” he said.

The company is now gearing up for its debut at the New York Market Week in September. It is also planning a significant launch of its spring-summer collection for 2025, targeting a bump to revenue and margin in fiscal year 2026.

“We anticipate revenue exceeding $100 million in the next two-three years and expect it to scale up going ahead,” said Lalpuria. The company’s margin profile is also expected to reasonably improve, as branded goods typically command margins ranging from 22% to 30%, he added.

Wamsutta is also expected to expand the company’s distribution channels from solely business-to-business to include business-to-consumer and direct-to-consumer channels, both online and offline, broadening Indo Count’s market reach.

Earlier, the company was focussed mainly on B2B sales, with e-commerce accounting for 10% of its overall business. “Now we can build an online store of Wamsutta just like a Boll & Branch or Casper or anybody like that,” said Lalpuria.

Indo Count had in 2021 partnered with renowned British designer Jasper Conran to launch his bed and bath collection worldwide. Building on this momentum, the bed linen maker teamed up with US brand Gaiam the following year. Next came Wamsutta.

Indo Count acquired Wamsutta from Bed Bath & Beyond parent Beyond Inc earlier this month for $10.25 million.

With this acquisition, the textile company plans to increase its product offerings to categories such as rugs, windows, carpet, table linen, and kitchen linen, other than bed and bath. It also plans to include mattresses and furniture, boasting a robust brand recall of over 80% in North America.

When Bed Bath & Beyond acquired Wamsutta in 2012, the brand’s global reach was limited as a retailer confined to the US, Canada, and partly Mexico.

“With $500 million in annual revenue and a peak of $800 million annually, Wamsutta had a good run at Bed Bath & Beyond stores,” Lalpuria said.

In the premium branded segment, there are retailers like Pottery Barn, West Elm, Restoration Hardware, Nordstrom’s D2C brand Shapermint, Brooklyn Bedding, Casper, and Boll & Branch. Indo Count will also be competing with private labels including Calvin Klein, Tommy Hilfiger, Donna Karan, Kate Spade, and Ralph Lauren.

Bright prospects

Indo Count gains from the rising share of Indian home textile players in the US market, said Nuvama report dated 13 March. This trend is fuelled by the “China plus one” strategy, following the US ban on cotton from Xinjiang region, China’s focus on its own market, and the increased manufacturing costs in China, the report added.

Having said that, revenue shall hinge on demand picking up. In the past, the home textile export market, particularly bed linen, has weathered challenges such as the rise in cotton prices, lower demand due to inflation, inventory build-up with US retailers, and supply chain disruptions.

Nuvama Institutional Equities anticipates a compound annual growth rate of 15% in revenue, 20% in Ebitda, and 24% in profit after tax from FY23 to FY26. In the nine months ended December, its revenue from operations stood at 2,331 crore.

Indo Count is also leveraging its low debt levels to pursue both organic and inorganic growth, Lalpuria said.

“We already have two licenced brands in our kitty–Jasper Conran and Gaiam. And now, we are in talks and exploring new licensed brands to add to our portfolio,” Lalpuria said.

“There is ample opportunity for the company to enhance its capacity utilization, targeting 62-65% this year, with about one-third of its capacity remaining untapped, offering potential for revenue growth,” he said.

 

In the last couple of years, the bedsheet manufacturer has expanded its capacity to 153 million metres from 90 million metres. “Around 95% of revenue accrues from exports (74% to the US),” said Nuvama Institutional Equities report dated 13 March.

As of March quarter, the company’s exports have likely risen 38% year-on-year and 67% sequentially to 1123.7 crore, according to Arihant Capital Markets.

Although there are some short-term disruptions due to longer transit times caused by the Red Sea crisis, analysts see growth prospects for the bed linen exporter amid the US ban on cotton imports from China’s Xinjiang.

The FTAs signed with Australia and the UAE, the potential for more agreements with the EU and the UK, and various government initiatives are likely to aid textile exports, they added.

“European tariffs of 12% pose a significant hurdle for Indian home textile exporters. Post FTA European markets would open up a huge market for home textile players,” said Vikram Suryavanshi, vice president-equity, PhillipCapital (India).

“EU market is in fact marginally bigger than the US; however most of home textile players have 65-70% sale from the US while 12-15% from the EU region due to duty disadvantage compared to Bangladesh and Pakistan,” Suryavanshi added.

Lalpuria acknowledges some current industry challenges, including the need for Free Trade Agreement approvals and high input costs, which he hopes the government will address to support further industrial growth.

“Logistic costs are another headache, eating up around 6-8% of expenses compared to just 2-3% in developed countries. Plus, interest rates have risen to 9-10% from 7-8%,” he pointed out.

However, moving forward, Lalpuria believes the demand outlook for the company remains steady with green shoots such as higher retail sales and improving consumer sentiment seen boosting growth.

 

 

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Published: 26 Apr 2024, 03:36 PM IST

Disclaimer: Along with publishing our own news, we get news from various sources namely from news wires ANI, PTI, other reputed finance portals and individual journalists. We are not legally liable for any inaccuracies in the news and expect the reader to do their own due diligence.

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Finance enthusiast, Mutual fund expert.




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