In a world of tightening consumer expenditure, value retailers are placed better than their premium counterparts. In the stock markets, Koutons Retail, a value apparel retailer, has fared relatively better than its peers, losing just about half its share value.
Trading at Rs 505, the stock is valued at 19 times its trailing 12- month EPS. On the basis of enterprise value, it is valued at twice its trailing 12 month sales and estimated FY-09 sales.
Though a shade more expensive than other retail stocks, the company’s prospects may justify current values.
Holding this stock will deliver in the long term, as Koutons appears to be able to sustain revenues with its value-based positioning and scale of operations. It has also embraced the franchise route of expansion earlier than other players and, therefore, has a first-mover advantage.
Koutons owns clothing brands — Koutons and Charlie Outlaw for men, Les Femme for women and Koutons Junior aimed at children. Though a branded player, it delivers quality apparel priced at affordable rates.
It has a massive network of more than 1,400 stores across the country. Sizeable presence in cities besides metros allows it to access the mass market while establishing brand recall in smaller cities where bigger names have not yet entered. A related product line of footwear, KZone2, was launched in late 2008, with an estimated 50 Koutons stores to carry the products.
Manufacture will be outsourced to control costs, but contributions from this brand to revenues this fiscal will be minimal.
Scaling up… read on.
Koutons Retail (India): Hold
January 12, 2009 by Cris | 183 Comments