Financial Performance Summary

  • Revenue: ₹979 crore in Q1 FY27, representing 4% year-on-year growth
  • Growth Drivers: Equal contribution from volume growth and price increase
  • Profitability: Underlying PBT (Profit Before Tax) grew 22% year-on-year
  • Gross Margin: Expanded by 130 basis points, though this was diluted by 100 basis points due to channel mix changes
  • Advertising Spend: Increased by 25% year-on-year

Operational Highlights

Retail Expansion

  • Crossed landmark of 2,000 Exclusive Brand Outlet (EBO) stores
  • Franchise store count expanded to 750
  • Direct Operating Stores (COCO): Approximately 1,250 stores
  • Zone-Based Management (ZBM) now covers 775 stores contributing 80% of COCO retail revenue

Inventory Management

  • Inventory progress continued year-on-year for 2 consecutive years
  • Stock turns at industry-best levels of approximately 2.5-2.7
  • Full-price sales reached nearly 90%, showing continuous uptick over last 4-5 quarters
  • Google My Business scores improved to 4.9 for the quarter

Product Strategy

  • Reimagined product creation funnel with reduced complexity
  • Store line count reduced to 68% of levels from 2 years ago
  • Target to further reduce to approximately 60% of original levels

Cost Inflation and Pricing Strategy

  • Faced 5-6% cost inflation primarily in synthetic materials (crude oil derivatives)
  • Implemented commensurate price increases to mitigate cost pressure
  • Inventory holding period of 140-150 days delayed full impact of cost push to current quarter (Q2 FY27)
  • Confident in ability to neutralize margin impact through pricing actions

Brand Performance

  • Hush Puppies: Led growth performance
  • Floatz: Delivered extremely strong sequential and year-on-year growth
  • Bata: Grew well, particularly in ladies category driven by Taapsee Pannu campaign and Everyday Essential range
  • Power: Performed well
  • NorthStar: Was a drag due to conscious rationalization of current lines, with stronger collection expected in coming quarters

Channel Performance

  • Broad-based growth across all channels
  • Franchise channel growth faster than company-owned stores
  • Healthy growth across e-commerce channels and multi-brand distribution outlets
  • Franchise channel growth comes at lower gross margin but neutralized at EBITDA level

Manufacturing and Supply Chain

  • Vendor consolidation program ongoing (reduced from 120+ partners to ~60 currently)
  • Target of 15 core manufacturing partners plus 15 satellite partners over 3-5 year journey
  • Expected margin expansion of approximately 200 basis points from supply chain efficiencies over this period
  • Rationalization of kits, molds, uppers, and materials creating economies of scale

Employee Costs

  • Employee costs remained flat over past 5 quarters
  • Driven by VRS impact and organizational restructuring
  • Productivity improvements through technology implementation (Blue Yonder merchandising platform)
  • Store manpower largely unchanged

Forward Outlook

  • Management expressed reasonable optimism but declined to provide formal guidance
  • Expect significant product portfolio changes by March 2027
  • Continued elevated marketing spends expected to support new product launches
  • Monitoring impact of inflation and price increases on consumer demand
  • Potential for 600+ additional franchise trade areas

Management Participants

  • Mr. Gunjan Shah - Managing Director and Chief Executive Officer
  • Mr. Amit Aggarwal - Director Finance and Chief Financial Officer
  • Mr. Nitin Bagaria - AVP, Company Secretary

Analyst Participants

  • Prerna Jhunjhunwala (Elara Securities)
  • Avinash Karumanchi (Motilal Oswal Financial Services)
  • Sameer Gupta (IIFL Capital)
  • Aryan Garodia (Ambit Capital Private Limited)