This luggage leader is staging a turnaround. But can it overcome its bagge?

  VIP's Market Share Dropped, Inventory PILED UP, and Debt Increased, Weising on the Stock's performance.





  The company's share price has a 52-wheek low of  <span class="webrupee"></span>248 on 7 April-A Level Last Seen during the Pandemic-Down from the Stock's All-Time High of  <span class="webrupee"></span>775 that it reached on 1 April 2022.





  To arrest the slide, vip initiated a restructuring that included an inventory liquidation and a balance sheet repair. These efforts are now showing early signs of revival. Its share price recoveered about 43% from  <span class="webrupee"></span>248 on 7 April to  <span class="webrupee"></span>355.40 at the end of trading on 27 May.

A hard turn

Vip’s earlier dominance came from its Leadership in Soft Luggage, in line with customer preferences at the time. But as demand shifted towards hard luggage, this positioning turned into a headwind. Soft Luggage Inventory PILED Up Due to Weaker Demand, While Hard Luggage Inventory Remained Lean at Around 15 days.

As of March 2024, VIP Held Inventory Worth 916 Crore. Of this, nearly 300 Crore was soft Luggage, Enough to last six months giving that the company was sold 50 Crore Worth of Luggage Each Month.

Yet, Vip chose not to aggressively discount the stock on its inventory as most of it was also new. Demand Didn’T pick up meaningful, hurting performance.

This was reflected in the numbers. VIP’s Ebitda Margin Dropped 670 Basis Points to 9.1% in FY24 as Sales Growth Lagged and Fixed Costs Surged. Net Profit Fell 65%. Working Capital Days Rose from 89 in March 2023 to 135 in March 2024.

To fund operations, borrowings increase sharply. Net debt surged nearly 4x to 485 Crore in March 2024, up from 122 Crore a year earlier. Finance costs dubled from 28 Crore to 55 Crore.

Meanwhile, competitors adapted faster. Safari Had Alredy Pivoted to Hard Luggage, Giving it an edge. Both Safari and Samsonite Gradually Gained Market Share at Vip’s Expensese. VIP’s Market Share Declined from 47% in 2020 to 38% in 2024, While Safari’s Market Share Increased from 25% to 32% to 32% in this period.

At the same time, vip was slower in scaling e-commerce, which made it harder to move inventory. The Build-up in Inventory and Working Capital needs, coupled with aggressive discounting by new-age brands, added further pressure to recovery efforts.

An operational reset

These challenges prompted business restructuring. Vip brieft in the Boston Consulting Group to Lead the restructuring, which was aimed at market share growth, margin recovery, revenue growth, cost optimization, and debt.

Consequently, vip discontinuated production of upright soft Luggage and Started Liquidating Soft Luggage Stock at Discounted Pries. At the same time, vip shifted its focus to Premiumization, E-Commerce Growth, and Hard Luggage.

In FY25, VIP Reduced Its Inventory by 218 Crore, mainly from the 300 Crore Soft Luggage Pile. Inventory volumes declined from 6.3 million pieces in fy24 to 3.8 million by the end of fY25.

With leaner inventory, Vip’s sales Volume Increased 11% in FY25. However, Price Growth Lagged Behind Volume Growth Due to Lower Realization from Inventory Liquidation at discoured prices. Revenue Grew only 3% to 2,178 Crore in FY25.

But with the liquidation phase Neering its end, revenue is likely to improve as salas begin to normalize at better realizations. Additional, growth will benefit from a low base in fy25.

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Margin erosion following inventory liquidation

The impact of liquidation was more profound on vip’s margins. Gross Margin Fell 660 Basis Points to 46% in FY25, Weighed by Lower Realization. Ebitda margin declined to 4% from 19% as the cost of Goods Sold Rose 11% to 1,185 Crore. As margins collapsed, vip swung to a loss of 69 Crore in FY25 From A 54 Crore Profit in FY24.

Positive signs

VIP also focused on optimizing costs and cutting Inefficiencies. It shut 133 unprofitable stores in fy25, mostly in Tier 3 and 4 Towns, and Opened Just 32 Outlets in High-Footfall Locations. Its cost-control efforts have started in its numbers.

Total expenses dropped 8%, driven by a 20% reduction in manpower costs and a 5% decline in other expenses. Manpower Now Accounts for 10% of Revenue, down from 12% in FY24.

The Lower Inventory Helped Reduce Working Capital Days to 106 in March from 135 a year earlier. Vip’s cash flow from operations also increase, enabling it to repay borrowings, leading to a 118 Crore Reduction in Net Debt in FY25. Net debt now stands at 367 Crore.

Category-Wise Salice has also improved. Soft Luggage Now Contributes 16% of VIP’s Revenue, Down From 24% Previous, while Hard Luggage Accounts for 60% of Its portfolio, up from 52%.

As for VIP’s Distribution Channels, E-Commerce Now Accounts for 31% of the mix, registered a healthy 40% growth.

Margin recover and premiumization

With leaner inventory, vip has started Reducing Excess Warehousing. In Q4Fy25, It surrendered 400,000 sq.ft. of warehouse space; Another 300,000 sq.ft. is set to be released shortly. These moves are expected to support margin expansion this Quarter (Q1fy26).

Vip aims to reduce its inventory by another 150 Crore in FY26, AlongSide Debt Reduction. With Lower Debt, its Financing Cost Should also come down, thereby increasing its profitability.

VIP Now Plans to hold soft-linking inventory at natural demand levels (75,000-80,000 pieces). Management has been hinted that demand for soft Luggage could rebound, essentially in the Premium Segment.

Within Product Categories, Most Product Launches will continue to be in hard bagge. Vip plans to maintain its e-commerce share at 30%, meaning online and offline channels will grow. The company is focusing on Increasing Its Premiumization Share in E-Commerce.

Brand-Wise, The Company Plans to Push Its Carlton, VIP, and Skybags Brands to Grow Its Premium Segment, which has lagged in the last 3-4 years. Vip aims to increase its share in the Premium Segment (Excluding Aristocrat) from 54% to 60%. The company has also stepped up marketing efforts, which are yielding positive results.

VIP expects to grow faster than the industry average of 12% by 1-2 percentage points. It will focus on the top 14 cities for store expansion to ensure better store-level profession. The company plans to open 50 stores in FY26-20 Carlton-Exclusive and 30 Vip Lounge Stores-Targeting High-Value Urban Markets to Support Premium Positioning and Revenues.

Valuation offers Room for Rerating

FY25 was a year of consolidation and operational Reset for Vip Industries. While the company took a hit on margins and posted a loss, foundational fixes are in place. Management expects the benefits of restructuring to start reflecting from Q1fy26.

Meanwhile, vip trades at a price-to-mills multiple of 2.4x, a 62% discount to safari, which trades at 6.3x. Vip nowsers better placed to ride the recovery, but a rearing will depend on Sustained Improvement in Margins and Return to Profitability.

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About the author: Madhvendra has over Seven Years of Experience in Equity Markets and has cleared the Nism-Series-XV: Research Analyst Certification Examination. He specialises in written detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.

Disclosure: The Writer does hold the stocks discussed in this article. The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is not a recommendation. If you want to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.