Lux margin shrinks but sales growth is a silver lining, stock drops 7%

Shares of Lux Industries fell more than 7% on Wednesday after the company reported a decline in net profit with an impact on its profitability in the June quarter.

As of 1:30 p.m. IST, the company’s shares were trading down 6% at Rs 1,813.85 on BSE. Lux Industries is one of the biggest players in the hosiery sector, holding a market share of approximately 15% of the organized industry.

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The company’s gross margins have been dented due to the stockpiling of high-cost inventory in previous quarters and volatility in raw material prices. However, Lux Industries said this was partially offset by growth in overall volumes and the company’s ability to pass on rising input costs.

The only silver lining in the company’s performance has been revenue growth.

“This revenue growth was largely fueled by improved traction of flagship brands, particularly ‘ONN’ and ‘Lyra’ associated with its historic brand ‘Lux Cozi’ which is part of the premium and mid-premium portfolio,” said said President Ashok Kumar Todi.

Todi added that the company has also seen a gradual shift towards online shopping, largely driven by millennials, which has allowed Lux ​​to create new channels to interact with end users and offer various products.

Overall volume increased by 14%, largely due to increased demand for branded products from Tier I, II and III cities. In addition, volume growth for economy brands remained broadly flat at 8%. The mid-range segment recorded an overall double-digit growth of 52%, while the high-end segment recorded strong growth of 25%.

“Our export share is also gaining momentum, export revenue share in the June quarter of FY22 was 9% of our total revenue,” Todi said while adding, “At the “Going forward, with easing raw material prices and streamlining high cost inventory, we expect healthy growth in our margins to drive consistent, competitive and cash accretive growth.”