TCNS Clothing Co shares slump to 52-week low on disappointing Q3 results

TCNS Clothing Company, a leading women’s apparel retailer in India, saw its shares drop by around 7% and hit a 52-week low after announcing its disappointing third-quarter earnings report.

At 11.26 am, TCNS Clothing Company was trading at Rs 446.05 on the National Stock Exchange, down 4.59 percent from the previous close.

The company reported a net profit of only Rs 50 lakh, which was down 98 percent year-on-year. The drop was attributed to higher depreciation, lower other income and interest expense, coupled with weak operational performance, which weighed on the bottom line.

Furthermore, the company’s revenue also declined by 6.8 percent on year to Rs 306.1 crore, dragged by specific fabric issues in brand W, muted B2B online sales, and challenges in Future Group-operated Central stores.

EBITDA margin also contracted by 620 basis points to 13% in the Oct-Dec period. The EBITDA margin was still significantly lower than pre-COVID levels due to negative operating leverage.

Brokerage firm ICICIdirect expressed disappointment in TCNS Clothing Company’s Q3 revenue performance, stating that even an undisrupted festive season could not help the company report growth over pre-COVID levels.

In a report, ICICIdirect wrote, “Revenue and profitability remained lower than pre-COVID levels in Q3, which is a cause for concern, and improvement in both these parameters would be a key monitorable for the company’s performance.”

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The company’s shares have been hit hard, with the stock down nearly 50% from the highs tested in April 2022. The slump is indicative of the challenging environment for retailers in India, who are facing headwinds from the COVID-19 pandemic and the resulting economic slowdown.

Brokerage firm Emkay Global Financial Services retained its hold rating with an unchanged target price of Rs 570 for the stock, given its visible near-term challenges. “Stronger traction in the bottom-wear brand, Elleven, and faster margin improvement remain potential upside risks for TCNS Clothing,” the brokerage wrote in a report.

Despite a meaningful correction in stock price, Asian Markets Securities also maintained its hold rating for the clothing company due to its lower-than-expected performance delivery.

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