Impact of distribution changes was higher than what we expected: Varun Alagh, Honasa Consumer CEO
Beauty and personal care company Honasa Consumer, which runs brands like Mamaearth, fell to a net loss in the September quarter while operating revenue declined. The company was hit by a restructuring exercise in its distribution and supply chain wherein it is shifting from a super-stockist model to appointing direct distributors. The quarterly performance lagged the Gurugram-based company's internal projections, cofounder and CEO Varun Alagh told ET's Pranav Mukul. Edited excerpts:
You had mentioned in the June-quarter earnings that the company will see an impact on revenue and profitability. Has it been in line with your expectations?
<div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-115351398»>The impact (of the restructuring) was higher than what we had planned and expected. We initially had certain assumptions in place, which were based on a certain level of inventory but as we reached the execution stage, it turned out to be relatively higher. We had imagined it to be a ₹50 crore inventory impact, but it turned out to be a ₹70 crore impact. That has led to scale reduction, provisions in expiry and damages of the returned stock, which impacted the Ebitda as well, which was higher than what we had expected.
Looking ahead, have you recorded the full hit of this exercise or could there be more in the coming quarters?
I don't think in the following quarters we foresee any impact from (inventory) returns. All of that has been transitioned and taken into account. The buildout from here onwards is going to be slightly gradual. In 70% of the areas, we have been able to
