The sharp increase in gold prices over the past few months have substantially impacted Tata Group-firm Titan Company Ltd’s jewellery sales during the second quarter of this financial year. According to the company’s business update for the quarter, the gold price surge affected demand from the middle of June.
“The weakness continued during July too and resulted in considerable de-growth in sales during the month,” the jewellery and accessories-maker said, adding that while retail sales declined in July, the next two months saw retail growth rise to 15 per cent year-on-year (YoY) due to enhanced focus on promotions and schemes.
However, while retail sales grew 7 per cent during the full quarter, “revenues as per financials declined 2 per cent YoY substantially due to adverse impact of the hedges matured during the quarter,” the company said.
Gold prices have shot up over the past three months due to an increase in geopolitical tensions, slowing economic growth globally and a shift in central bank interest rate stances across the world. Ten grams of 24 carat gold, which was priced at Rs 34,720 in Delhi on July 1, was significantly dearer come September selling for Rs 40,300 on September 4. Though gold prices have halted their climb over the next few weeks, experts say escalations in geopolitical tensions or economic disruptions hitting global growth like Brexit or collapsing US-China trade talks may see rates rise further.
Watches, eyewear biz does better
Titan’s other major business divisions have done better than the jewellery unit, but they haven’t escaped the impact of the ongoing broad-spectrum demand slowdown. “Weak consumer sentiments led to moderation in growth rate of division to 7 per cent for the quarter and 13 per cent for the half-year,” it noted. However, in its other major market -- Eyewear -- it has recorded a sales growth of 28 per cent, but partly aided by a ‘Buy 1, Get 1’ discount offer via Essilor.
The low revenue growth stands in sharp contrast to Q2 of the previous year, when Titan’s Jewellery, Watches and Eyewear segments recorded a much better 13.3 per cent, 20.4 per cent and 13.3 per cent respectively.
Titan profits may fall, analysts say
Analysts say Titan may see a fall in profits for the quarter. According to Edelweiss Financial Services’ executive vice president Abhneesh Roy, it could clock just 0.4% revenue growth, with PAT declining by 3.2% YoY.