BlueStone Jewellery and Lifestyle Limited (BLUESTONE) Q1 2027 Earnings Call Transcript

Ladies and Chairman, good day, and welcome to the BlueStone Jewelry and Lifestyle Limited Q1 F527 earnings conference call. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I will now hand the conference over to Ms. Riyad Dharia from EY Investor Relations for opening remarks. Thank you. I love you.

Thank you, Ryan. Good morning to all the participants on the call. Before we proceed with the call, let me remind you that the discussion may contain forward-looking statements that may involve known and unknown risks, uncertainties, and other factors. It must be viewed in conjunction with a business risk that could cause future results, performance, or achievement to differ significantly from what is expressed or implied in such forward-looking statements. Please note that we have mailed the results and the same is available on the exchange. In case you have not received the same, you can write to us and we will be happy to send the same over to you. To take us through the results today and answer your questions, we have the management of Bluestone, represented by Mr. Gaurav Singh Kuchwaha, founder and CEO, and Mr. Rume Dugarh, CFO. We will start the call with a brief overview of the quarter gone past and then conduct the Q&A session. With that said, I will hand the call over to Gaurav. Over to you.

Thank you, Rhea. Good morning, everyone, and thank you for joining us at Bluestone's Q1 F527 earnings call. Q1 marks a strong start to the year. Revenues grew 49% year-on-year to 733 crores, and pre-endless EBITDA rose 135% to 55 crores. Close to three times the rate of revenue, taking our operating margin to 7.5% and expansion of 273 basis points. That relationship, revenue scaling against a cost base that grows far more slowly, is the operating leverage in our model becoming visible. And it is what defined the quarter. And it came against the backdrop of the custom duty on goal moving from 6% to 15%, which makes the breadth and consistency of demand particularly encouraging. As always, the detailed disclosures are available on the exchanges, so I'll keep my remarks brief and focus on a few things that matter this quarter. First of all, I want to say something about how we see this category because it shapes everything we do. For a very long time, the jewelry industry was dominated by relationships in brand marketing, and designs had very little role to play in this category. We built Bluestone on the opposite belief that design, technology, and consumer understanding are how you earn the right every single day. And the market has moved decisively in that direction. Jewelry is coming out of the locker and into everyday life, but not just for weddings, but for how people live now. The non-wedding everyday segment is where the consumer is genuinely moving, and it is a segment the industry overlooked for a very long time. That is precisely where we have chosen to build. This is also why I would encourage you to look at Bluestone not only as a jewelry company, but as a consumer internet company that has chosen jewelry as its category. You were born online, and the way consumers reach us reflects that. The moment the thought of buying jewelry enters someone's mind today, they go online. They research, they shortlist. They form a view long before they step into a store. More than 80% of our sales originates online. The store that plays its own irreplaceable role, jewelry is emotional in high consideration, and it is in the store that a consumer sees and feels the peace, and where trust is finally sealed. We do not think of these as separate channels. They are one continuous journey, and because the intent is largely built online first, our stores convert with a productivity that a purely physical retailer cannot match. Making that journey seamless from discovery on a screen to a moment of delight at the counter in a metro or in a tier 2 town is a real differentiator, and it is what lets a network of 352 stores punch well above its weight. It also shows how we run and measure the business. The metrics we report to you, cohorts that compound, repeat revenue shares, wallet shares, customer lifeline are the grammar of the consumer internet business, and that is no accident. Our right to exist as a brand comes from being, at our core, a technology company. We are the only jewelry company that has built its entire technology stock in-house. I would also urge all of us to look forward rather than backward. People tend to underappreciate how quickly consumers in technology are changing. My wife does not shop the way my mother did, and my daughter will definitely not shop the way my wife does. An industry that plans on the assumptions of the last 20 years will misjudge the next 10. We would rather build for where the consumer is going than for where the category had been. One thing worth highlighting this quarter is our same-store sales growth of 39%, which was broad-based, with older cohorts posting SSLGs in line with the overall portfolio. What we see in that data is that our stores continue to compound as they mature, which speaks about the headroom that remains to grow per-store revenues across all cohorts. This performance sets us up well going into the rest of the year, and our focus stays firmly on execution, deepening our relationship with the consumers we already have, and continuing to bring new ones onto the fold. We are building a consumer-internet business in India's most loved category, and the category is only now beginning to be built the way it should be. Thank you, everyone, and over to questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, please note, we request you to restrict to two questions per participant and rejoin the question queue. We take the first question from the line of Harish Adwani from Access Capital. Please go ahead.

Thank you for the opportunity, and congrats on a great set of results. So, my first question was on your comment about the demand softening in May post the custom duty hike, but then it normalized to June. So, how are the demand trends shaping up as we move into July, particularly in the studied categories?

Yeah, so, you're right. Essentially, last quarter had been kind of mixed. Actually, there was, period was great, then there was import duty hike, which softened the demand. And then, I think, as June progressed, a lot of that demand kind of kept on coming back. And we continue, we continue to see that the same trend continue into July also. So, nothing. No major difference compared to what we observed in June.

Perfect. And one follow-up on that, see, now that the gold price inflation is beginning to taper off quarter after quarter as we move into the second half, how should we think about the growth construct in the second half of the year?

Right. So I think historically, Harish, what we have seen is we have generally performed very well in the cases where Or in the environment, but the gold pipes had largely remained stable. Just one sec, there is some noise in the background. Yeah. Yeah, Harish. So basically, they generally perform much better when the gold prices have remained stable. So across last six years of our retail operations, I think last one and a half years had been the noisiest of the period. And stable gold prices actually are very, very good for the consumer demand. I understand that the investment-led demand kind of increases significantly when the gold prices are going up or is just highly dependent on gold price. Ours is more of a consumer business. Essentially, our customers are not gold coin customers, are not investment-driven customers. Our customers are price point-based customers. So essentially, a person who is looking to buy a 20 to 40,000 rupee product is going to buy a 20 to 40,000 rupee product, no matter the damage. Now, last, with the increasing gold, with the sharp, with the environment with the gold increased very, very sharply, we struggled. We struggled because our merchandise dislocation was happening in real time, in a month, in two months, and so on. So I wish gold prices remained stable, and then we continue to operate the way we operated for the last six years. And I think we feel a lot more comfortable in that environment. We believe that's the most conducive environment for us to be able to deliver the targets that we have set up for ourselves, which is essentially almost 30% or so SSG over the next four years, and along with distribution growth, taking the overall revenue to around 12,000 floor number in the next four years.

Got it, sir. Very clear. And last question for my side. So, the repeat revenue contribution has now gone up to about 60%, which is about 9% points higher from last year. But on the flip side, we see that the new customer addition, which used to be $50,000 every quarter, has kind of come down to a number of around $40,000. So, we kind of have recalibrated the entry-level price points, but are there any more initiatives required to take that new customer addition back to 50,000, 60,000 levels?

Right, Harish. So essentially, you're absolutely right in that observation. So essentially, a lot of growth that we are seeing right now is being ably supported by very strong repeat in our business. And fundamentally, the category is such that, see, they acquire a lot of customers in 28, 30, 32, that kind of age range. Now, at that time, they start with lower ticket sizes, etc. But as they move, as they age, they actually start buying jewelry a lot more frequently, and their ticket size also increases. So that is what explains a very sharp increase in repeat revenues, and I'm saying absolute repeat revenues, year over year, as we have calculated. I think all knew that merchandise dislocation was real. We had sliced and diced our data in every which way, and as we continue to fix that, I think we should see, and we have over the last three to four months, as we are fixing it, we are seeing an upward tick, right? But we are actually comparing YOY numbers. I'm looking more at like month-on-month numbers, we're trending in the right direction and so on. So all the signs, all the signals are pointing that we are moving in the right direction. And as we fix it at scale, that merchandise dislocation, I think this should only keep on getting better from here.

Thank you, sir, and all the best.

Thank you, Rish. Thank you. We take the next question from the line of Jair Doshi from Kota. Please go ahead.

Hi, thanks for the opportunity. Some of the questions. First one is, can you talk a little bit about the trends on lower caratage, you know, whether you're seeing any demand or interest for 9 carat or is it still predominantly 18 carat and 14 carat? Any changes that you've observed and now particularly since gold price largely stabilized for the past 2-3 months?

Yeah, so 9 carat is, Jay, we have not tried 9 carat so far, and at some point in time we might, but right now we have not. We have seen, we have done some experimentation with 14 caratage. So what we have generally seen is in lower price point, it helps plug that gap that got created. However, just lowering the caratage is not the only strategy we have. We have done a lot of redesigning also in entry price points. We have created designs using new techniques, which actually give more sense to gold, even while consuming lesser amount of gold. So on multiple dimensions, we have tried fixing that. We are trying to fix that gap. Caratage is definitely one experiment that we have done, and in some pockets, it has done well. So, specifically in lower placement products.

Sure. In terms of consumer sentiment for natural diamond studded jewelry, have you seen any improvement over the course of the last six, nine months? And are you seeing any pickup in diamond carotage-led growth, you know, when you look at your SSG numbers? I would love to understand more of this. Thank you.

Yeah, so, quite honestly, we've never seen lab-grown diamonds denting natural diamond demand also. So while I understand that it created noise in the minds of the investors, especially with a lot of companies getting VC funding and so on, over the last three to four years, we had never seen any significant change in the behavior of our consumers just because Labgrown was around. And I think that also largely is pegged at the fact that Labron made its play in bigger solitaire. So if you look at U.S. markets also, that was a category where it operated in India. The number of people who would buy one carat, two carat, three carat solitaires, that number was very, very small to begin with. And that is essentially, I think, that is where the lab grown play happened. And that's why, for us, particularly, that number was even less than 1% of our overall revenue. Hence, we never saw any dislocation. And these trends that, okay, because of lab grown, something came down, and suddenly this shift is back towards natural land, we never saw. We never saw the first shift or the second shift.

And lastly, now that gold prices are stabilized, is there any thought process internally to increase hedging or will you still continue with 50% hedging?

I think our hedge policy was never designed with a bold price. So just to recollect, it is designed with a certain objective of risk management which centers around liquidity, capital structure, and the P&L impact. So really, these are the three metrics. Now, obviously, it is not our business to predict gold prices because any change effectively means that we are taking a view on gold price higher or lower. So, we are consistent with our policy, there is no change.

Thank you so much.

Thank you. We take the next question from the line of Devanshu Bansal from MK Global. Please go ahead.

Hi, Gaurav, hi, Rumit. Congratulations on a very strong quarter. Gaurabh, just a small follow-up firstly on that new versus repeat customer growth, right? So, I just wanted to check you explain this, but according to you, what is an ideal growth that we should sort of target from new consumers? Maybe if you could share your view on that.

These specific numbers are too micro. We will not be able to comment specifically with such specificity.

Okay, maybe some range or color if you can provide as in just for the analysts to sort of gauge as in what is your performance actually tracking well on the new customer side as well. Obviously, both variations can be there between repeat and new, but ideally what is a good range at least if you could highlight.

So, Devanshu, I think you have to see both sort of in context because what also happens is that as our store cohorts start to mature, and a larger and larger part of the cohort is maturing, and if you look at our consumer base, it's almost close to a million customers, right, and they are aging. So, it's not... It's not that there is a certain number or a mix that we are trying to get at. I think our objective is to be able to grow both and to acquire new customers as well as drive. The repeat base is going to become larger and larger, just from a mathematical fact that now we have about a million consumers and our store cohorts are aging, right? So when the vintages are young, so if you look at the broader trend line from an SSG perspective, there are basically three vectors that drive the SSG, which is your new recruitment. Repeat and AOV. Now, the older the cohort, the more driven by repeat and AOV, younger the cohort, more driven by new customers, right? So I think you should look at both independently and there is no target mix. I think at a broader level, the objective function is to obviously build more market share and keep adding more consumers, right? So I think both kind of go hand in hand in that context.

Got it. Second, this quarter, I guess, store sizes are around 4,500 square feet, right? So, whatever you have opened. So, this is the new normal that we should expect for future stores as well. Also, checking if there is any change in investment per store in these larger stores is a good sort of comment on it.

So, I think as you mentioned earlier, incrementally, as we get into tier 2, tier 3, the rentals are much lower and we are, so that is why we take a larger space. Now, all of this is not operational square feet, right? So this is basically the incremental capacity that we are building for the kind of store productivity we are able to see in our older cohorts. Second, from a rental perspective on the absolute level, and we look at it on an absolute cost per store, rent per store, revenue per store, those unit economics don't really change materially. So the operational square feet is still in the broad territory that we've seen historically and it doesn't impact the unit economics. So we get a bigger frontage and at the same cost and it creates more capacity for absolute revenue productivity.

Sure. Sir, lastly, this time around, our growth has been better versus the competition. I mean, talking about the immediate competition, not the general jewelry sort of industry. So, any few things which you could highlight, which we are sort of doing differently, which is helping us gain, maybe share in the category that we operate in?

Yeah, I think, see, at the very core, it's a focus on designs. Contrary to how almost everyone... Okay, we still continue to believe very, very strongly in designs, and hence the focus on creating differentiated designs. I think this merchandise dislocation that we are fixing, and there's still room there, that has supported our growth well. And, I think, more importantly, over a longer horizon, as Rimet also pointed out, we are not saying that, okay, we are only for lower price point, we are only for higher price point, and so on. What we believe is that getting customers to love you, to love your products in this category, and to trust you is one of the biggest challenges. And, once we have overcome that challenge, our endeavor is to actually generate more and more, repeat more and more business from the same customers. Now, for that, we also need to grow when the customers are growing. So, a person in her 30s, when she's, she might be buying a 30,000, 40,000 ring, but when the same customer is, let's say, 45, 50 year old, she might actually be buying a, 4, 5, 6 lakh rupee product also, because she is kind of, she is just doing much better in life, she has more disposable income, etc. So, our endeavor is to also grow our selection, our offerings, as our customers are also aging. So, I think focus, very clear focus on all these facets, and not kind of trying to bucket ourselves in a smaller, For a smaller use case, and those are the things that are going to continue supporting our growth over very, very long term.

Godwin Gaurav, thank you for taking my questions. All the best to them.

Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Kai Valyabeng from IIFL Capital. Please go ahead.

Hi, I got a viral metamount.

Yes, please go ahead.

Yeah, so two questions from my end. Firstly, on gross margin, this quarter we are seeing a meaningful expansion of 100 pips. This is excluding the inventory gain, which I'm talking. We saw a similar situation in 3Q, where, you know, the structured share had actually declined, but back then it was a mere 20-30 pips of expansion. So could you just throw some call on the drivers behind this?

Yeah, so see, I think through the quarter there are some product exchanges in terms of studied share and what type of studied got sold, etc. But I wouldn't read too much into the gross margin trends. I think what is important is to look at broadly the gross margin and contribution margin, which is a more relevant metric. It has been largely stable. Really the focus here is on the operating leverage, right, and if you look at our broader operating EBITDA performance, I think we are already at 7.5%. There has been a significant expansion that we have been seeing for the last several quarters. And from a directional perspective, as over the next four years, we get to 12,000 crores and scale-driven operating leverage will continue to flow through. So there is massive headroom to expand the operating EBITDA margin from 7.5% to the 15% handle. So a stable sort of contribution margin with scale-driven and vintage-driven operating leverage will continue to drive the EBITDA.

I think that's...

That's really the big operating story out here. Understood, understood.

Secondly, sir, now, when we move into the second half, we will be lapping a very sharp gold inflation, nearly 80% in 3Q, and I think 60-65% in 4Q. So, do you think that poses an inherent headwind as to our growth prospects into the second half?

I don't believe so, Ryan. In fact, it was… Okay, I am… See, our view on this thing is totally contrary to how the market behaves, because that's what I saw in our data. In fact, Q3, last year Q3, was the slowest quarter in our history for us. And that was when the gold rose sharpest. Right, sir. Gold stays range-bound. If gold remains range-bound, it's even better for us.

So, basically, the volume part of the aspect shall make up.

R.C. is not a volume business. R.C. is not a volume business. A person comes to buy a 30,000 rupee product, that person has come to buy a 30,000 rupee product. Just because gold has increased, let's say gold has doubled, those customers that generally transact with us, their budget does not increase. They don't have more disposable gold. Now, there are other people who are actually, who generally buy with the intent of investing in that. People who say that, okay, every year I'll buy a 10 gram gold coin. So next year, if 10 gram is double, they'll spend double. But they are not constrained by their pocket wallet size.

Right?

So they have a fixed budget in mind. Right. So it doesn't matter. In fact, it makes it even more difficult for them because they don't find as great an assortment that they could have found last year.

Got it, sir. Lastly, sir, could you just tell me the inventory figure at the end of June, if that's possible?

It's about 2,800 odd crores.

2,800 odd crores. Understood. Thank you, sir. That's all from my wish you the very best for future projects.

Thank you. We take the next question from the line of Ankush Agarwal from Surge Capital. Please go ahead. Yeah, thank you for taking my question.

So, first thing that I want to understand is we have been maintaining that we have about 50% hedge at the inventory level. So, I wanted to understand this 50% is purely for the gold inventory that we maintain or it's for the total inventory that we have, which includes the stone side of the deal.

So, largely there are two components for the inventory, gold and diamond. Diamond prices in the category that India uses and we operate in, the prices are super stable. As I think, Varav had already alluded to the fact that our exposure in large diamonds or solitares, which is where all the price movement etc. happens, is negligible. So, large part of effectively, in terms of inventory, is gold, which is what we hedge 50-50.

Okay, and this 50% ratio includes GML, or that is separate?

Yeah, I mean, GML is an instrument, right? So, it is on the total base. GML is also an instrument for hedging. So, it's all included.

Okay, okay. The second thing I wanted to understand is, you know, Anishmit, we have given this sort of a guidance of 50% revenue growth, CACS, and the math behind that, what we have shared is 30% SSG and 20% distribution. But, um, Honestly, if you have 30% SSG and if you do 20% distribution growth, that would not lead to 50% revenue growth, because distribution does not add up the same amount of growth in the first or second year like what SSG does. So if you add 20% distribution, that might translate to 10, 12, 15% growth. So I'm just trying to understand the math of this 50% number that you have shared.

So, you're absolutely right. That's not the way the numbers add up. And hence, reported SSCG is not what we were actually alluding to at that time. What we were actually talking about that time is that at maturity also, stores keep on compounding at 30%. You tend to get there. Now, reported SSSGs will always be different because, let's say, stores, which are in their absolute first year, would show a very high number on a low base and so on and so forth. So, I think the SSSGs that we were referring to there and that we discussed also, we spoke about our oldest cohorts and their performance in year 3, year 4, year 5, year 6, and so on, not the performance between year 1 and year 2. So, if those continue to deliver at that, then the path falls, but not on the reported SSSGs numbers. You're absolutely right.

Correct. So, the understanding is that for you to report 50% crore, you are assuming that the reported SSG will be even higher.

Obviously, we did not work on reported SSG per se. We worked on more fundamental construct, and that was what we discussed at that time.

Okay. And last week, I will say, you said 2,800 crores of inventory, right, as of Q1N?

That's right.

Okay.

That was all. Thanks. Thank you. We take the next question from the line of Kallan Gupta from Asset 3 Meta Investment. Please go ahead.

Yeah, hi. Thanks for the opportunity. Am I audible, right?

Yes, Kallan. Please go ahead.

So, two questions. First on the inventory turnover side. So, as you shared the data of Jim Royal at the time of IPO, At the time, you said inventory turnover, I think, is not meaningful. How much gross margin we are generating on the inventory, that is something important. So, Jimroy is the metric that you shared. If you calculate the Jimroy part across the last four years, that is declining. From 62% that you shared at the time of FI 23 is now, I think, 48% in FI 26. So, just want the clarification on that, and we are not sharing the Jim Roy numbers, although we can calculate that on the given numbers, but please share the light on Jim Roy side. The second one is on the broader question on the operating leverage, which is said the gross margin expansion is happening and the return margin expansion is happening. So, that is something on the fixed cost that is spreading across your revenue, but what about the variable part, manufacturing or the operational operating leverage, if you share some light on, and how much in-house manufacturing you are doing, and how much we can reduce the cost of that manufacturing part. So, that's below the gross margin side.

So that's two broad questions.

I'll take that. So firstly, on the Jimroy bit, what happens is if you look at the last three to four years, we've opened a significant number of stores, right? So there are basically two vectors that drive the inventory turn. One is that How many stores I have opened in the last one year, two years, three years, because as the vintage builds, the inventory turn and inventory productivity continues to expand. Second factor is what happens to the gold price, because what happens is you report the balance sheet and you report the inventory number on the balance sheet date, so obviously there is a lot of gold price inflation which has been the case for the last 2-3 years, to that extent inventory levels look significantly higher, and the consumer demand obviously moves up and down depending on how much the gold prices are moving. So, these are the two fundamental vectors. Now, on the first bit on our core inventory terms, I think in our investor day we had shared a detailed mix of how inventory terms are trending across cohorts and as we would have noted that most of our cohorts are demonstrating very very strong inventory terms anywhere between 1.8 to 2. So largely the blending that you are talking about as a function of how many new stores and what is the share of new stores in our broader portfolio. And as we are growing distribution or adding stores on a larger base, the dilution of new stores is going to be significantly lower. So we've already communicated that our blended inventory turns should continue to improve and over the next four years should go to the 1.7 mix kind of handle and which is already demonstrated. And you will see improvement through this year as well, right? So this year inventory turn should get better. Thus, I think from a Zimroy perspective, it is a little bit more mathematical that the decline is there. So fundamentally the construct of the ROCs of our business has not shifted. To your second question on the manufacturing cost, I think in my answer to one of the questions that was asked earlier, I said the right metric to look at is the contribution margin, which actually captures the cost of production, cost of manufacturing, and some of the other direct costs. And that is where the margins have been reasonably stable. And as the build on the scale and as we move from 2,440 crores of revenue in FY26 to 12,000 crores in over the next four years, you can see that there is a massive amount of scale benefit that we will continue to get both at the Store EBITDA level as well as at the operating cost, operating cost level which includes A&P and operate cost. So I think that journey will continue year after year for the next four years.

So how much in-house manufacturing do we have?

Broadly all of it is in-house, about 95% of the products that we sell is manufactured in-house.

95%? That's right. Okay, so how much it will benefit to the margin side as compared to the peers who have maybe 50-60% outsourcing? So how much it will benefit in a long term basically?

I mean, see, you can, there is about 300-400 business point delta, but I think it's hard to It's hard to put an exact number there because different products have different cost of manufacturing, different margin profiles, but I think it's important to take a step back and look at why we do manufacturing. It's not just a margin driver. Obviously, that is a benefit. But the objective function for manufacturing is that as we are completely design driven, it is and that is the biggest differentiator which allows us to charge a premium pricing and get in more customers and continue to build and grow with those customers. The product differentiation over the long term can be retained if you control manufacturing. Otherwise, in a vendor-driven ecosystem, your designs, eventually, even if you give your own designs, there is a high risk that those designs get dissipated, get commoditized, get stopped with small tweaks in different stores across different brands and networks, and thus your long-term ability to charge a premium from a consumer perspective, To get in more consumers and to maintain that differentiation, I think obviously gets harder. So it's a very strategic call. It's not a margin driven or a cost call.

Okay. And outlook for the store opening?

So, I think we've guided to about 20% Keger over the next four years in terms of distribution growth. So, I think that's distribution. Distribution, I mean, stores, right? Distribution, I mean, stores. Number of Stores Yes.

Okay, thank you.

We take the next question from the line of Pallavi from Samiksha Capital. Please go ahead.

Thank you, sir, for taking my question. Just wanted to understand what would be the marketing spend this quarter versus last year's same quarter. First question.

Yeah, so marketing spend this year was around 50, around 50 crores. I think it is around 6.9% of the overall revenues, and last year also it was around 6.9% of the revenues. However, you have to understand, so see, marketing spend is something which is, which I would generally encourage you guys to not look at a quarterly level, because there's a certain, there's some noise coming from the background, please just put that person on mute. Yeah, so marketing spend as a percentage of marketing spend should not be looked at a quarterly basis. It's the quarterly variations are going to be there, especially if you look at as a percentage of revenues, because revenue itself is very seasonal in our. In our business, and marketing also has certain seasonality based on the properties available to us, based on opportunities available to us, and those two seasonalities might actually not go hand in hand. So if you look at the overall marketing spend annually over the last four years, we have taken that down from around 9.2 odd percent to 6.6 percent for last full year. It has every year, for the last four years, every year it has been falling in terms of percentage of the overall revenues. In absolute terms, we continue to increase it as we see that as a significant driver for getting more market share. So going forward also, that trend is only going to continue. We believe that over the next five years, this 6.6% will go down to around 4.5%, 4.6%, I think for this full year also, we should see a number which is better than last year, so something lower than 6.6%, but I think the overall guidance, the overall trajectory will be in that direction. At the same time, just a single quarter here and there, I would not read too much into that.

My second question would be if I can have the inventory number in kgs.

We don't, that is too competitive, we don't talk about that. We've given the value number already and that's anyway the relevant number from ROC perspective.

Thank you so much.

Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant. We take the next question from the line of Gopal Navandar from SBI Life. Please go ahead.

Hi, am I audible?

Yes, please go ahead.

Yeah, yeah. Thanks a lot and congratulations for a good set of results. I think most of the questions are already discussed. What I wanted to understand is because in the last couple of days there is a decline in the gold prices. Are you seeing any change in the trends for exchange and all? Is it more fresh buys are coming or it is still the exchange that is still prevalent?

Sure, Gopal, no significant change in just the last two, three days. In fact, I think that's kind of very, very, very short term to even base any long term strategy. But I think over time, what we are seeing is as gold continues to increase, the exchange is definitely picked up. Because the perceived value of, because of the value of the gold that was sitting in households. We saw certain uptick in gold exchange also along with that import duty hikes, etc. So I think, in general, the exchange this year is higher than, let's say, what it used to be. But no such, like, not very, no significant change, let's say, over last. One to two weeks off, not recently.

And in this environment, are you seeing more studded being sold in this softer gold price environment?

Again, few percentage points here and there, but nothing material, Gopal. We see very consistent, reasonable consistency in consumer behavior.

The store edition was little softer in this quarter. Should we expect that annual run rate of 70-80 to be maintained for this year?

Yeah, Gopal. So I think the store edition should not be seen on a linear basis. I think the broad line from a 20% distribution growth. The broad trend line from a 20 percent distribution growth should largely be retained and we expect you know that that to be delivered through this this year as well.

Okay. Okay. Sure. Thanks a lot.

Thank you. We take the next question from the line of Barun Singh from Alpha Accurate Advisors. Please go ahead.

Yeah, thank you. My first question is, I did not quite get the logic behind the 50% growth aspiration and the max of, you know, 30% SSG plus 20% area expansion growth. And so if you can, you know, just elaborate on that. And secondly, what is the, if you can help us understand what is the underlying reasoning for 20%, you know, area expansion growth, why not? 14-15% and a much faster acceleration in the margin profile. I mean, if you can throw some light on this part also. Thank you.

Yeah, right. So, I think that 50% the way it works on fundamental SSHG, not reported SSHG, that I already explained in response to one of the questions. Ryan, there is some noise. Can you just make sure that everyone else is on mute?

So, what's the

difference between fundamental SSG and reported SSG? See, reported SSG is a mix of essentially, let's say, when the stores are just starting up. So, in the 14-15 months, because the base is small, the reported numbers would have a higher number because of that. But if, and I'm saying, what I mean, the fundamental SSG is rather, it's not fundamental, it's actually long-term SSG. So, basically, what we discussed now on our investor also was that the oldest of the cohorts actually continue to grow at 30% plus.

So, you are saying that in the PPP, the 30% SSG number that you have given, that's fundamental SSG. That's not reported.

No, no, that's SSG even at maturity. Now, the reported SSG would be slightly higher than that because of the new stores that have just come up. Okay. So that math is not essentially what you can do on the fundamental numbers. I think, see, if you look at the overall growth also, overall growth, this quarter also is closer to 50%. In fact, historically, we had seen, we had comfortably delivered 50% growth, save last year when the gold environment was kind of very, very, very difficult, the gold volatility, etc. So we continue to feel very comfortable with those numbers. I think the second question, what was the second part of your question?

The second part of the question was, why 20% area expansion? Why not 14-15% and much sharper margin acceleration? What's the necessity for faster area expansion, given that we are operating in an offline space, unlike a typical e-commerce equipment company?

Understood. So, here's the thing. So, I think for that, you'll have to understand the operating leverage of the business, apparently a little more fundamentally. So if you look at the expansion that came in last one year, a big chunk of that expansion actually, operating leverage, that expanded around 6.5 percentage points last year, the bigger chunk of that actually came from scale expansion and not store-level profitability expansion. So if you have more stores, your marketing spends and your corporate expenses also continue to shrink. In fact, over the next four years, when we are saying that it's going to go from 7.5% to close to 15%, the bigger chunk of that will come from scale and not a store-level operating profit. And that will get... And that can, that will be delivered with a sharper or stronger distribution growth, not with a lower. Distribution growth. So I think higher distribution, I mean, someone can say 25% also. Why grow at 25%? Why not 25%? So this is essentially our call. This is the data, etc. that we see. And I think our base assumption that if we grow slowly or if we grow slower, our operating leverage will show up sooner. That base assumption itself is flawed because that bulk of that operating leverage is not sitting at slow level EBITDA. It's actually sitting at operating level EBITDA.

We take the next question from the line of Harsh Shah from Bandhan AMC. Please go ahead.

Yeah, hi, Gaurav and hi, Romit. Gaurav, your AOV for the quarter is...

Harsh, I'm sorry to interrupt you, but if you could please use your handset because your audio is too low.

Sure, can you hear me now?

Yes, it is loud and clear. Please go ahead.

Yeah, yeah, hi Gaurav. My question basically was that our company AOV is close to 78,000 this quarter. What would be the AOV for our repeat customers?

See, repeat specifically for this quarter, we don't have that number, but repeat typically is higher than new, in general, what

would be the differential, Gaurav? Let's say on F26 basis or let's say full year basis, differential would be around now.

I think repeat AOPs would generally be 20-30% higher than new. Okay. And see, these are still blends, right? Even average order value, there is a blend.

Correct, correct.

I think the bigger trend is the...

When you look at the cohort of, let's say, repeat customers who are in the five-year cohort versus three-year cohort versus, let's say, one-year, let's do a cohort, right?

It continues to expand. In fact, that was the point I was coming to, because all these averages actually depend on a lot of things. If you're not doing, let's say, well in lower price spend, then also AOV will increase and so on. So AOV itself is not the right metric to look at. And the right metric is to look at the cohorts. So as people are maturing, are they buying more frequently? And are they buying higher ticket sales? And do we have the right products to kind of offer them? I think that continues to be the focus of the company. And I think the broader trend is the longer the people spend with us, the consumer spend with us, higher their AOV is.

Got it. And, Gaurav, frequency-wise, how would that be different? Let's say, a five-year-old cohort repeat customer in terms of frequency, let's say, NF26 versus, let's say, a two-year-old customer.

Yeah, so I think a certain frequency gets established, and from second, third year onwards, that does not change much.

Okay, okay. Got it, got it. And this AOV, if we slice it nice in Metro Tier 1, Tier 2, let's say, would that be materially different? Or would that be in the same wall park as the company average?

Like I said, I don't have, I don't have a number. In general, I have not seen too much deviations. Across tiers. Across tiers, I haven't seen much deviations.

Thank you. We take the next question from the line of Ashish Kumar from Infinity Alternative. Please, go ahead.

Thank you. Congratulations for a good set of numbers. I just wanted to understand a little bit more on the inventory. I think the inventory from the last quarter has gone up at 600-700 crores. What will be the reasons, and when do you expect this to come back to, I think the last quarter we had mentioned that it will come back, hopefully. Because of once the code price is stabilized. So when do you expect it to go back? Medium term, what do you see inventory to turnover ratio? So if you can maybe talk a little bit about that.

Yeah, so I think just a correction, inventory has not gone up by 600-700 crores. So March inventory was 2650 crores. And obviously we've added stores, etc. To the second part of the question, I think more fundamentally, if you look at our cohort level performance, our older cohorts are already at 1.8 to 2 inventory turns. So, initially when a new store is opened, you start at a certain inventory level and as the SSSG continues to build in that store, it reaches to a normalized 1.8 to 2 kind of terms. So that is where the broader trend line is. The reported inventory turn is a function of what is the mix of younger stores, what is the average age of the broader portfolio. And thus, given where we are in our journey, a large part of our big distribution build in terms of the dilution coming in from new stores is going to be lower and lower incrementally. And the vintage of my base will continue to expand, which will keep trending this inventory turn to the direction of 1.7, 1.8. So that is where we will get to. And you should see continuous improvement, right? Obviously gold price is something that is external, but all else being equal on a like-for-like basis, we should continue to see movement towards That's 1.7, 1.8. And At those kind of levels, the store-level ROICs that our business generates is in the range of 40% and I think these are store-level ROICs that our older stores are demonstrably generating and as Gaurav had already mentioned that even those stores which are at 40% ROICs. We are still incrementally doing SSSG and we have seen in this quarter in line or better than the company averages, which means that the growth momentum just does not stop even in the older cohorts. So we feel quite comfortable and extremely confident of the progression that our cohorts are making and the expansion in the broader inventory which will continue over the next four years. Each year.

We take the next question from the line of Shree Narayan Mishra from Baroda PNB Paribas. Please go ahead.

Thanks. My first question is to try to explain. So, here on here, total store area...

Shree Narayan, I'm sorry to interrupt you, but your audio is not clear. Would you please use your handset?

Is it better?

This is better. Please go ahead.

So, our total store area has expanded by 25.5% year-on-year, while rent expense has grown by 35%. Now, there is a gap of 9.5% which will have element of annual escalation as well. But given that we are expanding entire two and three cities, ideally this gap should have been lower even after incorporating the annual lease escalation. So why this number seems to be higher? You can throw some light.

Yeah, so as I was explaining in one of the responses to a question asked earlier, We, in our category, all the unit economics, productivity, cost structures, etc., we look at it at a per store level. So while the rent per square seat in a tier 2, tier 3 might be lower, but on an absolute basis, we take up larger space. It also gives us greater frontage, greater visibility. There's a lot of advertising that we run even on our store frontages, which acts as billboards, etc. So, so fundamentally at a per unit cost level or a monthly rent basis or an annual rent basis, it's not very, it's not very different as we get into tier two, tier three. Second part is that given the revenue productivity that our older cohorts generate and the revenue productivity that we see at the store levels, rent as a percentage over a period keeps coming down and it becomes over time a very small number in the overall store level unit economics. So really, unlike most other categories where merchandise is a function of square footage, the revenue productivity is a function of square footage, that's not really the case here, right, given the size of the individual products and inventory. So that linkage, I think, is not the right way to look at it. I think a per store kind of unit economics is the best way to see it, and I think that's reasonably stable.

So, what is the annual lease escalation that is building?

Typically, about 3 to 5%.

3 to 5%, okay. So, to your point that the store sizes are bigger in Thai 2 and 3 cities, so that's why I was comparing the area, square feet area, not the number of store counts. Still, there is a gap. So this is what I am not able to correlate.

No, but I see at our scale there are different mixes, right? And different localities, which locations the stores are in. So I think best is to just do a per store based metrics and you will see that that number is very stable.

Okay, got it. And last very short question on what would be the studied mix in this quarter? 57%. Thanks.

Thank you. Ladies and gentlemen, we take that as the last question and conclude the question and answer session. I now hand the conference over to Mr. Rumit Tukar for his closing comments.

Thank you, everyone. Thank you for joining the call today. I look forward to seeing you through the quarter and on the next quarter as well. Bye-bye and have a good day.

Thank you, sir. On behalf of Bluestone Jewelry and Lifestyle Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.