A secular growth trend in retail consumption and a turnaround in pantaloons can boost ABFRL fortunes!
AB Fashions is a leading fashion and retail house with brands like Louis Philippe, Peter England, Van Heusen, Allen Solly and many more. Apparel is a basic need and in India it is a $60bn industry which should reach $100bn in the next 5 years. The Company acquired pantaloons from Future group in 2015, but however the brand failed to deliver and was straining the financials of the company with poor growth. The company restructured pantaloons by positioning it as a value brand, rationalized the network, reduced the average size of stores, shut down loss making stores and also increased the penetration of high margin private labels to 60% from 40%. These initiatives should help expand the margins for Pantaloons by 100bps across the next two years. Moreover, the company has also launches an online platform for pantaloons offerings and has tied up with Ecommerce giants like amazon and Flipkart which will help it further boost its presence. The company is also adding brand extensions to Van Heusen and entering the inner wear segment and has plans to do similar extension for its other established brands as well. ABFRL uses the franchise partner model which enables it to expand at a rapid pace with minimal capex. Hence, we expect the company to deliver robust growth and expand margins considerably going forward.
AB fashions regained its strength from the 130 odd levels. This is the huge gap area in the zone followed by a big bull candle. Both are indication that the bulls had taken charge from the zone. The stock has maintained its trend line and that’s again very positive. That the stock is making higher tops and bottoms on the weekly charts is an indication of strength. The bears had hammered the stock from the 228 levels in Feb-16. The stock has halted its current rise in the same zone. The stock has currently taken the support at the 61.8% of the higher swing. That it has been able to cross the 61.8% is again an indication of strength. The huge spike in the volume in Aug-18 is very bullish as it is accompanied by a big bull candle as well. Any dip to the 195-200 levels which is the Fibonacci confluence zone can be utilized to buy. The stock is likely to retest the previous highs of 264 again in the near future.