NSE: MONTECARLO
The strength of MCFL is the woollen portfolio under the Monte Carlo brand (28% of sales). Within its segment, this has more than 50% market share of the organized segment. Monte Carlo woollen sweaters command high gross margins and this segment is the main source of income for the company. The problem has been that the woollen business has been a dog in terms of growth (sub 17% growth). The woollen portfolio has penetrated the northern and eastern parts of the country and has a limited market in the warmer parts. It grows in the mid-single digits, at best.
• MCFL has been investing in growing its non-woolen portfolio, which is cotton apparel. Within cotton too, a fair share of the portfolio is tilted towards winter wear (jackets) but the same is suitable for relatively less harsh winter regions of the country. The share of cotton has grown steadily over the years and now makes up 55% of sales. Other growth drivers have been segments such as home furnishings and kids’ apparel, which together make up 16.5% of sales.
• Historically, woolen apparel has been made in-house with all the raw material sourced from the erstwhile parent and now group company, OWM. For cotton apparel, some of the job work is outsourced to another group company – Nahar Spinning Mills Ltd.
• In terms of distribution, MCFL has had an over-reliance on the multi-brand outlets (MBO) channel (50%+) in the past but that has been under some stress post demonization and introduction of goods and services tax (GST). The company has attempted to correct the same in the last few years with a larger focus on LFS (large format stores) and online channels. The latter come with lower margins, call for discount sharing, and buy on a consignment basis. At the same time, they are important given they attract an incrementally higher number of consumer footfalls. LFS and online, each contribute 10% of sales and are fast-growing.
• MCFL also draws a fair share of 40% from the exclusive brand outlets (EBO) channel (400+ EBOs). EBO count has grown at 5% CAGR over the last seven years with EBO sales growing 10% i.e. 6% implied same-store sales growth (SSSG). 85% of the EBOs are franchised with a store closure rate of 13% (stores closed/stores opened). These metrics are not ideal, and the company should look to invest more in its EBOs as well. The store closure rate is on the higher side, too. However, on both these metrics, MCFL scores much better than KKCL. Also, please notice that the implied store SSSG of 6% is healthy and suggests potentially good store economics. The company’s own EBO count has increased 5x from 21 to 112 between FY18 and FY24. This is a move in the right direction.
The company offers a diverse selection of products under the “Monte Carlo” brand:
- ‘Luxuria’ caters to the premium menswear segment.
- ‘Denim’ features a dedicated line of denim apparel.
- ‘Alpha’ represents the exclusive collection for womenswear.
- ‘Tweens’ offers a specialized range for kidswear.
- ‘Cloak & Decker’ serves as the budget-friendly option for menswear.
- ‘Rock.it’ provides high-end sports and fitness wear.
- ‘Monte Carlo Home’ offers a comprehensive range of home textile products.
Revenue Mix By Geography
• NORTH – North India has been the major contributor to Monte Carlo’s revenues (53.3% in FY24). Revenue in this region has grown by 10.8% CAGR in the last 9 years. (FY15: 298.8 cr, FY24: 755.3 cr).
• EAST – East India has been the 2nd largest contributor to Monte Carlo’s revenues (19.5% in FY24). Revenue in this region has grown by 6.47% CAGR in the last 9 years. (FY15: 157.8 cr, FY24: 276 cr).
• CENTRAL – Central India has been the 3rd largest contributor to Monte Carlo’s revenues (9.97% in FY24). Revenue in this region has grown by 6.5% CAGR in the last 9 years. (FY15: 80.3 cr; FY24: 141.2 cr).
• WEST – West India has been a laggard and 5th largest contributor to Monte Carlo’s revenues (5.63% in FY24). Revenue in this region has grown by 12.83% CAGR in the last 9 years. (FY15: 26.9 cr; FY24: 79.7 cr).
• SOUTH – South India has been the smallest contributor to Monte Carlo’s revenues (3.62% in FY24), Monte Carlo has struggled to capture the market in this region. Revenue in this region has grown by 12.2% CAGR in the last 9 years. (FY15: 18.1 cr; FY24: 51.2 cr).
• OTHERS (incl. Online) – Online sales have picked up after COVID-19 and have been the 4th largest contributor to Monte Carlo’s revenues (7.95% in FY24) in a very short period. Revenue through this channel has grown from 21.7 cr in FY20 to 112.5 cr in FY24.
Monte Carlo has made a mark in the North and Eastern regions of India as winter in these parts of India is comparatively severe with respect to other parts of India.
Revenue Mix By Product Segment
• WOOLEN – Although Monte Carlo is majorly recognized as a pure winter brand, woollen segment contributed only 28.4% to its revenues in FY24. Woolen segment has grown at 8% CAGR with the slowest growth in the last 9 years. (FY15: 200.9 cr; FY24: 402.2 cr).
• COTTON – Cotton segment contributed 54.9% to its revenues in FY24 and has been continuously gaining share vs woolen products. Cotton segment has grown at 10.9 CAGR in the last 9 years. (FY15: 306.3 cr; FY24: 777.5 cr).
• HOME TEXTILE – Home textile segment contributed 10% to its revenues in FY24. This segment has registered the 2nd fastest growth in the last 9 years at 12.46% on a low base (FY15: 48.9 cr; FY24: 141.6 cr).
• KIDS – Kids segment contributed 6.5% to its revenues in FY24. This segment has registered the fastest growth in the last 9 years at 15% CAGR. (FY15: 26.7 cr; FY24: 92 cr).
Exhibit 1: Revenue mix shows increasing focus on cotton and home textiles with woolen share at 28.4% and cotton leading at 54.9% contribution in FY24
Revenue Mix By Channel
• MBO + Institutional + NCS + Online: MBO with other channels have been the largest contributor to Monte Carlo’s revenues at 60.97% in Q1FY25. Revenues through this channel have grown at 0.3% CAGR in the last 9 years.
• EBO – COCO: Company Owned and Company Operated stores have been the smallest contributor to its sales (Q1FY25: 9.98%). This is a smart move as COCO channel has high inventory write-off risk, at the same time these stores are necessary to improve its brand presence.
• EBO – FOFO: Franchisee Owned and Franchisee Operated stores have been the 2nd largest contributor to its revenues at 29.05% in Q1FY25. Inventory risk is fairly lower in this channel.
Exhibit 2: MCFL focuses more on EBO-COCO with a 10.1% share in FY24, showing growth due to enhanced brand presence despite higher inventory risks, ensuring stronger future positioning.
Store Mix By Channel
Exhibit 3: MBO Remains Dominant but Declines Post FY20; Strong Growth in SIS Reaching 422 Stores by FY24, with NCS Doubling from FY19 to FY24.
Exhibit 4: Store Openings Surge to 14% in FY23, Closures Decline to 2%
Effect of Store Format on the Business
Manufacturing Facilities
• MCFL operates two manufacturing facilities in Ludhiana, Punjab—one for woolen apparel and one for cotton apparel. As of March 31, 2014, the woolen facility housed 595 knitting machines, and nearly all woolen products are manufactured in-house. Since April 2014, some cotton t-shirts and thermals are also produced in-house.
• These facilities collectively cover an area of around 4.35 lakh square feet.
• There is manufacturing of approximately 2.8 million pieces of woolen garments and about 4.4 million pieces of cotton garments annually.
• MCFL designs around 900 SKUs each month.
Technology Upgradation
To meet the standards of technology up-gradation and modernization, the Company installed the automatic whole-garment manufacturing facility at the existing Ludhiana unit. This technology can knit an entire piece which provides a seam free fit and comfort unmatched by any other knitwear. This helps in the elimination of multiple manufacturing processes, thereby reducing wastage and increasing efficiency. The Company currently has 30 professionals closely tracking the trending global fashion.
Business Cycle
