For Titan, it’s time for lower growth expectations

BENGALURU: Tata-owned Titan Company has trimmed its FY20 guidance for revenue growth in its watches division to account for the slowdown in demand, according to a top executive, even as the company expects recovery to begin in the next six months.

For the June quarter, the Bengaluru-headquartered company recorded 20% year-on-year growth in revenue in the watches segment, driven by a large order from another group firm, TCS.

However, according to Ravi Kant, chief executive of Titan Watches and Accessories, the management said the growth rate isn’t sustainable and its expansion rate for the rest of the year could taper to 12-15%. “In July, we faced some slowdown. There is a general consumer sentiment and we certainly have to tone down our expectations. While we will continue our investments, advertising and expansion, we will not be at 15-20% growth like the first quarter," Kant told ET. “The entire country is waiting for achche din, but it hasn’t happened. Market has been volatile."

The watches division earned Titan a revenue of Rs 2,441 crore in 2018-19 and accounted for about 13% of the company’s overall sales, with gifting contributing more than half of it.

Titan is India’s largest watch maker, controlling nearly half its watch market which is worth about Rs 8,500 crore at consumer price. The company sold about 16 million watches last year including brands Titan, Sonata and Fastrack.

The company said the slowdown in discretionary consumption is not just visible in the automobile and real estate sectors but also in the watches and jewellery segments. Sale of high-priced watches, a popular gifting option in Indian weddings, usually dips when the wedding season is weak. Consumers generally buy lowerpriced watches.

“A weak wedding season largely affects our watch business in smaller towns besides our jewellery business. The sale of our Sonata brand, a range of timepieces targeted at smaller Indian towns, is primarily impacted. People trade down,” said Kant.

In the jewellery segment, Titan’s retail growth in July was about 9% year-on-year but declined in the second half of the month. The management expects demand to recover once gold prices stabilise.

In a recent investor note, JM Financial said, “Titan’s first quarter FY20 earnings report was expectedly weak, but the nearterm outlook appears to be even softer, with revenue down in July, and August expected to be muted as well. The (company’s) management is still maintaining an over 20% growth guidance for the second half, but that appears more a wish than a target as of now, given that there is nothing available so far to suggest that things will improve for sure.”