With better execution on all key parameters, ABFRL is top pick in space; ‘Buy’ retained with TP of `250
BFRL has hired a Bollywood actress to endorse the Van Heusen range of women’s handbags, a fast-growing and high-margin category. We see this as a further step towards taking Van Heusen beyond men, after the brand’s recent entry into the women’s innerwear category. Women’s western wear is the fastest-growing category in organised apparel but makes up only 5% of lifestyle brands at ABFRL. We are positive about these steps taken to fill the portfolio gap. BUY.
Brand extension to women’s handbags
ABFRL has had presence in women’s handbags under the brands Van Heusen (priced from Rs 799 to Rs 1,499) and Allen Solly. It has now increased focus on the segment via the Van Heusen brand, running the campaign on digital media. We believe this segment has strong growth prospects given the total market size of `70 bn but with only 8-10% of this being organised. We note that sales of Caprese (handbag brand owned by VIP) crossed the `1 bn mark 5-6 years after launch; we believe Van Heusen, given its distribution reach, can achieve this in faster time.
Filling the gap in the portfolio
Women’s western wear is the fastest-growing category in the organised apparel market, helped by the lower base and changing trends. ABFRL, however, still has a small presence in this segment with only 5% coming from the segment under its Lifestyle brands (Rs 2.5 bn in size). However, on an overall company basis, the contribution of women’s wear (including ethnic) is in the range of 22-25%. The company also has women-only stores under the Van Heusen, Solly and Pantaloons brands.
Van Heusen the driving brand
ABFRL, post entering the men’s innerwear market under Van Heusen, has entered the women’s innerwear market as well with the same brand. This, along with its new focus on increasing visibility of the brand via women’s handbags, should help make the brand unisexual instead of the wide perception of it being a men’s wear brand. The company has also launched a range in the fast-growing athleisure segment under the brand. A similar strategy may be adopted under the Allen Solly brand, which has a more casual positioning compared to Van Heusen.
ABFRL remains our top pick in the space as we are witnessing improved execution on all key parameters from the company. The combination of strong brands, value retailing, entry into fast-growing new segments, coupled with a steady demand environment, should keep growth momentum intact. Steps towards filling the white space in the portfolio should continue to support the growth momentum. Maintain Buy with a price target of Rs 250.