Koovs sales rise but so do losses, expects profit by 2020
Koovs had a good year in the 12 months to March 31, on the sales front at least. The still-lossmaking London-listed business said sales order value growth was up 87% in pounds sterling to £10 million, or 65% in Indian rupees to INR1.616 billion, (the discrepancies in the figures being accounted for by exchange rate issues.)
Its net sales, which means the above figures minus tax, were £12.5 million (a 78% increase) or INR1.086 billion (a 58% rise). And wholesale revenue rose 49% to INR761 million.
All that came as web traffic rose 79% to 78.5 million visits to the site.
Which is all very well but what did it mean for the bottom line at the fast fashion e-tailer? As mentioned, the company, which mainly targets the young Indian market, it still making a loss but it said the pre-tax loss was “stable” at £19.3 million or INR 1.691 billion. While it doesn’t seem very stable in pounds sterling, given that a year ago the loss was £16.7 million, the rupee figure is rather more forgiving with the prior year’s loss being INR1.65 billion.
And the company admitted that India’s demonetisation had an impact. With cash being taken out of circulation, there was a pressing need to discount in an economy where shoppers often pay for online goods in cash.
Focusing on the good news, the company is still in its early stages and red ink on the balance sheet is to be expected. The loss may have been slightly wider this time, but sales leapt forward and if the firm can maintain that momentum, as well as its trading margin improvement, then profits should be on the horizon. The company certainly thinks they are and is expecting to move out of the red and into the black within just a couple of years.
It certainly appears to have plenty of cash available to invest in its growth. In FY17, it successfully raised capital of £39.1 million and added two new strategic investors, The Times of India Group and The Hindustan Times, two of the largest media Groups in India.
Koovs is headquartered in London, where the majority of its design and buying team is based, with all other operational functions based in India and this structure seems to be working for it.
There were some good numbers in the report that suggested better times ahead with that higher website traffic figure being one of them. But the company also said that it has seen brand awareness growth rising to 15% (from 2016’s 8%), driven by targeted and efficient marketing, and a 100% increase in both units shipped and repeat customers.
This is being helped by the large amount of exclusive product on its site. Some 40% of sales currently come from Koovs Private Label and together with selected edits from major brands that are exclusive to Koovs, 70% of lines are now unique to the e-tailer across the site.
The company’s social media activities are also boosting awareness and its social media audience has grown to over two million followers with “industry-leading engagement over three times” that of the nearest category competitor.
Importantly too, as we reported earlier, it signed its first international distribution agreement to launch the Koovs private label brand this summer in the Middle East on Amazon’s souq.com, the region's leading e-commerce platform.
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CEO Mary Turner said: "We are pleased to have delivered strong sales growth, significantly outperforming India's e-commerce market by over five times during the challenging period of demonetisation, which affected the whole economy in India.
"Our highly distinctive and targeted brand marketing has further established Koovs fashion authority among our core market of India's 18 to 34-year-olds.
"The focus for FY18 is to build on these foundations for sustainable growth towards profitability in FY20 and to further capitalise on the unique growth prospects of India's fashion e-commerce market.”
The company is not being particularly ambitious in targeting FY20 as the year in which it makes a profit. The Indian market for online western fashion is forecast to grow rapidly to $3.5 billion by that year and with the continued growth of India's digitally connected, aspirational middle class, Koovs believes that it “is extremely well positioned to benefit from this impetus.”
The company said that the funding it has raised has enabled it “to continue to build the brand efficiently through hyper-targeted marketing that is connecting and resonating with the young, urban and style-conscious customer and has established Koovs as the leading brand in its category for customer engagement across social media.”
It has also helped it complete the deployment of a new micro-services tech platform which is spearheading its 'mobile first' strategy and is “already providing innovative operational benefits, enabling the business to tap into new technology tools such as automated visual merchandising and promotions engine.”
And the company will need all the tech tools and social media engagement it can get because it has ambitious aims. It wants to increase its share of the youth fashion market in India from 4% to over 10% and to build Koovs into India's number one Western fashion destination by 2020. Watch this space.
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