ARVINDFASN - Arvind Fashions Limited Share Price

In the first quarter earnings call of Arvind Fashions Limited for FY26, management provided an optimistic outlook regarding the company's future. Revenue grew by 16% year-on-year, reaching Rs.1,107 crores, while EBITDA increased by 20%, amounting to Rs.148 crores. The company reported a significant surge in profitability, with PAT rising to Rs.13 crores from Rs.1 crore in the same quarter last year.

Management highlighted the intention to maintain this momentum by strengthening direct distribution channels, which now account for nearly 60% of revenue. There is an anticipated uptick in growth rates due to improving market conditions and government initiatives. The company plans to open approximately 150 new stores as part of its expansion strategy, targeting both Tier 1 and Tier 2 cities.

Forward-looking points include:

• A focus on product differentiation and premiumization, coupled with increased marketing investments.
• The expectation of double-digit growth in the coming quarters, supported by early demand from the festive season and positive economic indicators.
• Management emphasized the importance of ROCE and committed to investing in growth while managing balance sheet strength. The company aims to leverage adjacencies like footwear, which is expected to grow at approximately 20% due to improved supply chain visibility after prior BIS issues.

Additionally, with new leadership on board, including Amisha Jain as the incoming CEO, management expressed confidence in navigating the company towards substantial growth and capitalizing on existing brand strengths.

1. Question: What is the average breakeven timeline for new stores, and what specific regions or cities are targeted for expansion?
   Answer: Our typical breakeven timeline for new stores is between 12 and 18 months, depending on the brand and city. We are expanding in both top-tier and Tier 2 towns. Brands like U.S. Polo Association are seeing demand in Tier 2 and beyond, so we are targeting a wide range across the country.

2. Question: How are Flying Machine and Arrow performing this quarter?
   Answer: Flying Machine is showing good like-to-like retail growth, particularly in department stores. We're progressing towards mid-single-digit EBITDA. On Arrow, we are focused on improving profitability and aim to boost their growth trajectory sustainably as we move forward.

3. Question: How was the sales season, and what insights do you have on consumer behavior?
   Answer: We've had a successful season with good full-price sell-thru and reduced discounting by 1.2%, which positively impacted our margins. Our inventory health is strong, and we've experienced notable consumer acceptance, leading to market share gains both online and offline.

4. Question: What is the expected growth for the retail and wholesale channels moving forward?
   Answer: We expect the retail channel to grow by approximately 15%, supported by like-to-like growth and expansion efforts. The wholesale segment, which includes MBOs and department stores, is projected to grow at high single digits, bolstered by improved inventory and our recent marketing efforts.

5. Question: What is the outlook for the footwear segment given past challenges?
   Answer: Footwear growth is returning to the forefront as the BIS issues have largely been resolved. We expect aggressive growth in this category, targeting a revenue of Rs. 500 crores based on improved inventory position and continued brand traction.

6. Question: Will marketing spend trends remain high throughout the year?
   Answer: Yes, our increased advertising spend of 140 basis points is part of a conscious strategy to gain market share. This trend will continue into FY26, as investing in key brands remains a priority.

7. Question: With the leadership change, will the margin guidance stay the same?
   Answer: Yes, our focus on building stronger brand franchises remains unchanged, including operational leverage that leads to margin expansion. We anticipate continued improvement in our operating cash flow.

8. Question: What are your plans for cash generation post-debt repayment?
   Answer: Our focus remains on scaling our existing brands. Generated cash will primarily be reinvested into growth initiatives or used to retire any remaining debt, thus strengthening our financial position further.

9. Question: How do you plan to achieve growth in Arrow and Flying Machine?
   Answer: Both brands are in the journey from low single-digit to mid-single-digit EBITDA. Continuous investment in brand visibility, product offerings, and expansion of digital assets will be crucial to drive their growth while ensuring alignment with our overall profitability targets.

10. Question: What impact does IndAS have on your financials this quarter?
    Answer: The impact from IndAS is roughly 4% on an annual basis, which means to arrive at pre-IndAS figures, one should deduct approximately 4% from the reported EBITDA.