Elevation-backed The Souled Store turns profitable in FY24

The Souled Store, a direct-to-consumer pop culture brand, witnessed impressive growth with a 54.5% year-on-year increase in the fiscal year ending March 2024. The Xponentia Capital-backed company also achieved profitability during this period.

The Souled Store's revenue from operations grew to Rs 360 crore in FY24 from Rs 233 crore in FY23, its annual financial statements filed with the Registrar of Companies (RoC) show.

Founded in 2014, The Souled Store designs, manufactures and sells apparel inspired by pop culture, featuring themes from superheroes, movies, and TV shows. Its product lineup includes footwear, books, mobile covers, notebooks, mugs, and more.

According to the company's website, it has 18 stores across India. Revenue from the sale of products in stores and online accounted for 98.6% of the revenue, which increased 55% to Rs 355 crore in FY23. The rest of the operating income comes from membership fees.

The Souled Store also added Rs 5 crore from interest on deposits and gain on current investment which tallied its overall revenue to Rs 365 crore in FY24, compared to Rs 236 crore in FY23.

For the D2C brand, the cost of procurement accounted for 42.2% of the total expenditure. To the tune of scale, this cost grew by 68.5% to Rs 150 crore in FY24. Its employee benefits and rent also increased by 34.5% and 77.8% respectively in the previous fiscal year.

The Mumbai-based firm spent Rs 68 crore on advertising in FY24. Legal, freight, job work charges, and other overheads increased the overall expenditure by 40.3% to Rs 355 crore in FY24 from Rs 253 crore in FY23.

Over 50% YoY growth coupled with controlled expenditure led the firm to register a net profit of Rs 18 crore in FY24 compared to a loss of Rs 16.5 crore in FY23. Its ROCE and EBITDA margins improved to a positive 6.38% and 5.21% respectively. On a unit level, it spent Rs 0.99 to earn a rupee of operating revenue.  At the end of FY24, the company’s total current assets stood at Rs 225 crore including the cash and bank balances of Rs 44 crore.

The Souled Store has raised nearly $30 million to date, including a $16 million round led by Xponentia Capital in 2023 and a $10 million round led by Elevation in 2021. According to the startup data intelligence platform TheKredible, Elevation is the largest external stakeholder followed by Xponentia Capital.

The Souled Store competes with emerging fashion brands like Rare Rabbit, which reported Rs 636 crore in revenue with a Rs 76 crore profit in FY24; Bewakoof, operating at a scale of Rs 162 crore; and Virat Kohli-backed WROGN, whose revenue declined by 29% to Rs 244 crore in FY24.

The success of brands like Rare Rabbit and Souled Store goes to show just why the segment gets so much attention, with even large retailers like Zudio getting relatively rich valuations in public markets as well through Trent. The challenge of course for The Souled Store will be to retain its identity as a D2C brand, and not spread itself across channels. Advertising costs at under 20% of topline are acceptable in that context. 

Not only does spreading out across channels add a layer of complexity without delivering worthwhile returns to operations, in many cases, it can also take away the element of ‘exclusivity’ from the brand to its detriment. The target audience is young, and imagines itself to be non-conformist to an extent, and spreading out to become more ‘available’ has rarely worked with them.  Further, someone like the comic book loving consumer has had very limited options in India until now, with a world of older comic characters going off copyright protection or available for low licensing fees. That means brands like The Souled Store’s have an opportunity to target the fag end of boomers as well with renditions of characters like Tintin , Asterix and the even Phantom  and the likes perhaps.