Decathlon’s Turnaround in FY24: Profit Growth and Revenue Insights

Decathlon has showcased a remarkable turnaround in FY24, achieving a profit of Rs 197 crore, bouncing back from a loss of Rs 18 crore recorded in FY23. However, revenue growth remained stagnant, with only a 2.2% year-on-year increase by the end of March 2024.

While the analysis of Decathlon’s expenses that contributed to this significant profit will follow, focus will now shift to its revenue streams for the last fiscal year.

According to standalone financial statements sourced from the Registrar of Companies (RoC), Decathlon India’s operational revenue rose to Rs 4,008 crore in FY24 from Rs 3,920 crore in FY23.

Decathlon’s Business Model and Operations

Operating on a direct-to-consumer basis, Decathlon manages the entire process from design to manufacturing and retail of its sports equipment through physical stores and an online platform. The company offers a range of in-house brands for various sports including cycling, hiking, football, swimming, and running, fostering interactive in-store experiences that captivate customers. Currently, Decathlon runs 90 stores throughout India.

The sale of sports equipment remained the only revenue stream for Decathlon India. Additionally, the company earned Rs 58 crore from interest on investments and other non-operational income, bringing the total to Rs 4,066 crore in FY24.

Cost Management and Profitability

The procurement cost emerged as the major expense, constituting 64.4% of overall expenditure. This cost saw a decrease of 4.3% to Rs 2,448 crore in FY24, down from Rs 2,559 crore in the previous year. Employee benefits accounted for Rs 327 crore of the total expenses.

Decathlon maintained strict control over expenditures related to power, rent, repairs, fuel, advertising, information technology, freight, franchise fees, and legal/professional fees, leading to an overall cost reduction of 4.5% to Rs 3,797 crore in FY24, compared to Rs 3,975 crore in FY23.

Despite a modest increase in revenue, Decathlon India’s vigilant cost control strategies allowed it to post a net profit of Rs 197 crore in FY24, recovering sharply from a loss of Rs 18.6 crore noted in FY23. The company’s cost-to-revenue ratio stands at Re 0.95 spent to earn a rupee, with improved Return on Capital Employed (ROCE) at 17.79% and EBITDA at 14.49%.

Assets and Future Plans

As of the end of FY24, Decathlon’s total current assets were valued at Rs 1,247 crore, which included Rs 325 crore in cash and bank balances.

Last year, the CEO of Decathlon India, Sankar Chatterjee, announced a goal to double the company’s revenue to Rs 8,000 crore within the next three to five years.

Decathlon’s Market Presence

Decathlon’s achievements in the market are well-documented, and the acclaim received has been justly earned. The company has not only demonstrated the existence of a market for fitness-centric supermarkets but has also set the rules for the industry in many respects. Now, entering its 16th year in India, Decathlon continues to adapt its strategies in the e-commerce space.

Additionally, the firm has embraced innovative approaches by utilising third-party channels to attract new customers. While Decathlon remains a strong competitor in the sports and fitness industry, maintaining market share presents increasing challenges as the consumer base is not deep enough to support ongoing growth, with the law of diminishing returns becoming evident sooner than anticipated.

Decathlon has been judicious in selecting the segments it enters, primarily focusing on sporting and fitness hardware and products. However, it may soon be time for the French multinational to surprise the market once again, potentially gaining valuable insights from its experience in India after a decade of redefining the sales approach and cultivating a loyal customer base.