ABFRL - Aditya Birla Fashion and Retail Limited Share Price

During the Q2 FY26 earnings call of Aditya Birla Fashion and Retail Limited, management provided an optimistic outlook. They indicated a robust performance, with consolidated revenue reaching INR 1,982 crores, a year-over-year growth of 13%. All key segments demonstrated healthy growth, particularly the ethnic business, which grew by over 20%.

Key management highlights included the successful launch of the new Gen Z-focused brand OWND!, which saw revenue soar by 43% year-on-year. The company also unveiled a flagship luxury store in partnership with Galeries Lafayette in Mumbai, signaling a commitment to expanding their luxury segment. Additionally, TMRW raised INR 450 crores in Q2, bolstering their strategic investments.

Management reported a consolidated EBITDA of INR 117 crores, up by 7%, with margins at 5.9%. They noted that marketing investments, specifically a 200-basis point increase in advertisement spending compared to the same quarter last year, contributed to margin moderation. The ethnic portfolio remained strong, with a 280-basis point improvement in margins.

Notably, the first half of FY26 recorded revenue of INR 3,813 crores, reflecting an 11% growth year-over-year. The total retail network expanded to 1,190 stores across 7.5 million square feet, with over 30 stores added in the quarter.

Moving forward, the company plans to maintain its growth momentum, anticipating improved cash flows in the second half of the year due to a strong pipeline in wedding-related ethnic wear and strategic investments. Management emphasized their confidence in sustaining broad-based growth and efficiency improvements across operations. They expect the ethnic business to continue thriving, particularly in the wedding segment historically strong in H2, reinforcing the company's positive outlook for the remainder of the fiscal year.

1. Question: Devanshu Bansal asked if the cash consumption for the first half is around INR900 crores and whether there's a need to raise additional capital going forward.

Answer: No, Devanshu. We actually started with around INR2,172 crores in cash at the end of March, which is now about INR1,600 crores. It's a little over INR600 crores consumed. The first half sees a buildup of inventory, but cash collections surge in the second half. There's no immediate concern about the cash situation, particularly as wedding-related sales are expected to significantly improve cash generation.

2. Question: Devanshu Bansal inquired about the underlying like-to-like same-store growth (SSG) for Pantaloons post festive preponement.

Answer: Sangeeta here. The early Pujo significantly boosted our growth, especially in East India. While we experienced double-digit growth before heavy rains disrupted sales, it's tough to quantify the exact impact of preponement. Despite these disruptions, we see the quarter as successful and trust that underlying momentum remains strong.

3. Question: Devanshu Bansal asked for the margin performance in Pantaloons and the impact of OWND! and marketing investments.

Answer: Our strategy focused on improved product offerings and a substantial investment in marketing, which we've doubled compared to last year. This impacted margins due to higher marketing costs. However, our overall margins remain healthy, and we maintain optimism about growth and profitability as these investments pay off.

4. Question: Devanshu Bansal questioned the growth perspective of TCNS after observing a decline in H1.

Answer: Jagdish here. The recent uptick in TCNS sales due to our accounting adjustments reflects a robust 19% growth this quarter. Our integration has revised how we report revenues. Going forward, we're optimistic about sustaining growth in TCNS, especially with our product and marketing strategies strengthening its appeal.

5. Question: Kunal inquired about TMRW's increased losses and plans for the INR400 crores raised.

Answer: Yes Kunal, the heightened losses stem from ramped-up marketing efforts following a phase of investment for growth. While we're currently adjusting our spend-to-revenue ratio, this capital is primarily directed towards funding ongoing losses, working capital improvements, and some offline capex for omnichannel transitions.

6. Question: Hemant Shah asked about lease rent moderation and its future trends.

Answer: Lease rent tends to fluctuate based on new agreements signed for stores. With our store expansion plans, we anticipate an increase in overall lease liabilities. Thus, while some costs may moderate, the overall trend will likely see an increase given our store expansion strategy.

7. Question: Sameer Gupta questioned about the performance divergence in luxury retail margins.

Answer: The variance in luxury retail margins is largely due to the ongoing integration costs related to Galeries Lafayette amidst other expenditures. The Collective and mono-brand components maintain stable growth and margins, contributing positively in a fluctuating luxury market.

8. Question: Aditya Bansal asked about OWND! and its role in addressing brand identity changes in the value retail space.

Answer: Yes, targeting Gen Z, OWND! is designed to break through market clutter with distinctive branding and store design. We've achieved a 43% growth this period and added ten new stores. Our focus continues to be on building distinctiveness and relevance, impacting consumer engagement positively as we advance.