ABFRL - Aditya Birla Fashion and Retail Limited Share Price

During the Q3 FY '26 Earnings Call, management provided a cautiously optimistic outlook for Aditya Birla Fashion and Retail Limited (ABFRL). Despite challenges in the retail environment, particularly due to the shifting of festive and wedding-related sales, the overall demand is showing resilience, especially in the masstige and premium segments. Management noted that all new businesses have delivered over 20% growth, and the ethnic portfolio has reached an annual sales milestone of INR 2,200 crores.

Key financial highlights include an 8% year-over-year revenue growth to INR 2,374 crores, and a 13% increase in EBITDA, with margins improving to 15.6%. The ethnic segment saw a remarkable margin expansion to 22.7%, up 350 basis points from the previous year. For the first nine months of FY26, revenue stood at INR 6,187 crores, reflecting a 10% increase, while EBITDA increased to INR 655 crores, demonstrating a growth of 17%.

Management emphasized a strategic shift to premiumization across Pantaloons, targeting mid- to high single-digit "like-for-like" growth and overall double-digit growth in the coming years. They anticipate steady network expansion with plans to add about 20 new stores annually in Pantaloons and around 50 to 60 stores in TCNS next year.

TMRW is operating at an annual revenue run rate of INR 1,100 crores, with a growth rate of 29% year-over-year. Management also highlighted the ambitious rollout of Galeries Lafayette, which is expected to penetrate the luxury market effectively, projecting a steady-state margin of 15% to 20% over the coming years.

Overall, management remains confident in the long-term trajectory, with expectations for profitable growth as investments in new segments mature and operational efficiencies improve.

Here are the major questions asked during the Q&A session of the earnings call along with detailed answers provided by the management:

1. Question by Archana Menon: "My first question was on Pantaloons. So in your comments, you mentioned that there was positive trends in month-on-month performances and KPIs improving. So if you could share some more details on how the performance has been through the quarter and in January? And which are the key KPIs we are seeing an improvement? Any additional details?"

   Answer by Sangeeta Tanwani: "Our performance in Q3, considering the festive shifts, was LTL at about 3%. Key improvements include sell-through rates, particularly in women's western wear, which outperformed expectations. Our new retail identities are seeing better performance, and online growth has accelerated. Marketing investments aimed at premium repositioning are starting to yield results, enhancing our customer profile towards a younger demographic."

2. Question by Archana Menon (follow-up): "In line with the premiumization strategy that we followed, are you seeing a growth in the average basket size or ticket average bill order so far?"

   Answer by Sangeeta Tanwani: "Yes, we've noted a slight increase in average bill value by about 2-3% due to our premiumization efforts. By integrating non-apparel into our offerings, we aim for continued improvements in basket sizes moving forward."

3. Question by Gaurav Jogani: "Where are we on the path of margins improvement going ahead? So should we consider a large part of the rationalization of stores, etcetera, is now over, the cost elements initiatives are over, and probably going ahead, can we see improvement in margins and also in the revenue growth?"

   Answer by Ashish Dikshit: "The rationalization has curtailed revenue opportunities, but that is mostly behind us now. From Q4, we expect to see a gradual improvement in margins, although recent shifts temporarily dampened the outlook. OWND! has impacted margins by 100 bps this quarter, but we anticipate a return to the profitability trajectory."

4. Question by Gaurav Jogani (follow-up): "What kind of store expansion can we expect from the next year? What steady store expansion can we expect?"

   Answer by Ashish Dikshit: "We anticipate adding about 20 new stores in the upcoming year, focusing on larger store formats as part of our premiumization strategy, especially in Tier 1 and metropolitan areas."

5. Question by Ankit Kedia: "What is the target like-for-like growth in Pantaloons, which we are budgeting for over the next 2 years?"

   Answer by Sangeeta Tanwani: "We are targeting mid- to high single-digit growth in LTL for Pantaloons, with aspirations of achieving double-digit growth overall."

6. Question by Sameer Gupta: "By when do you envisage a positive EBITDA for ABFRL, considering TMRW, TCNS, and Tasva are still under losses?"

   Answer by Ashish Dikshit: "We anticipate the overall business excluding TMRW will achieve breakeven by next year. TMRW is expected to reach breakeven around FY '29, but our focus remains on improving profitability for the other segments significantly over the next two to three years."

This summary outlines the key inquiries and responses regarding ABFRL's business strategy, performance metrics, and forward guidance for growth and profitability.