ARVINDFASN - Arvind Fashions Limited Share Price

In the Q2 FY26 earnings conference call, management provided a positive outlook, highlighting a consecutive quarter of double-digit revenue growth of 11.3%, with sales reaching INR1,418 crores compared to INR1,273 crores in the same period last year. EBITDA grew by 18.2%, reaching INR200 crores"”a margin expansion of 80 bps. The management emphasized the importance of the recent GST reforms, which have lowered rates, leading to improved consumer demand, particularly in retail and online channels, which saw an impressive 25% growth.

Key forward-looking points include the expectation of ongoing growth through the upcoming wedding season and government initiatives expected to boost consumer disposable income. They foresee double-digit growth in retail and direct channels, with ambitions to continue this trajectory into H2 FY26. The management aims for a total store addition target of approximately 1.5 lakh square feet for the year, and they are on track to maintain this expansion.

Additionally, they believe positive consumer sentiment and product innovations across brands like U.S. Polo and Tommy Hilfiger will drive future growth. The footwear segment, expected to continue its upward trajectory with a focus on doubling its size within three years, is also highlighted as a crucial growth driver. Overall, management expresses confidence in sustaining margin improvements, targeting a range of 50 to 80 basis points in EBITDA margin expansion going forward.

Q&A Section Summary

1. Question: "If you can call out how the different brands have performed during the quarter? And any read on the festive?"

Answer: We've seen strong sustained growth across our brands. U.S. Polo clocked about 20% growth due to product innovation and new store openings. Arrow and Flying Machine are on track despite some transitional impacts due to GST reforms. The festive season showed double-digit growth, indicating positive consumer sentiment moving forward.

2. Question: "What are the key learnings from the last couple of months, and what strategies will you adopt?"

Answer: The focus remains on our core portfolio of five brands. We will sharpen brand positioning, ensure consumer segmentation, and ramp up product innovation. Additionally, we'll enhance marketing capabilities to better serve shifting consumer preferences. We're confident this will capture greater market share moving into H2.

3. Question: "Why don't we see EBITDA margin expansion despite gross margin improvement?"

Answer: A significant part of growth stemmed from direct channels, which carry higher commissions that impact profitability. We also increased marketing investments, which affect margins. However, our strategy to reduce discounting and improve cost efficiencies remains intact for future growth.

4. Question: "What has caused the drastic shift in employee costs lately?"

Answer: The employee cost spike is primarily due to a 10% salary correction and one-time management costs. We expect these costs to normalize in the upcoming quarter, and this should provide some leeway for EBITDA improvement.

5. Question: "What's the strategy ahead for the wholesale channel?"

Answer: There's been minor destocking in the MBO channel due to GST transitions, but overall consumer sales show growth. We're targeting a high single-digit growth moving forward and will continue to enhance our strategy to stabilize and grow this segment.

6. Question: "Can you shed light on the footwear segment's performance and outlook?"

Answer: The footwear segment is recovering after regulatory disruptions, now experiencing over 20% growth. We aim to double its size in three years, as we see significant demand and have strong capabilities in this category.

7. Question: "How do you plan to optimize the retail and online channel mix going forward?"

Answer: Our goal is to increase the retail and online B2C share to about 50-70%. We're dedicated to enhancing consumer insights and adapting strategies to meet consumer preferences, which are critical in optimizing this mix.

8. Question: "What are your thoughts on inventory freshness and its impact on sales?"

Answer: Our inventory freshness is over 85%, a significant increase due to improved product differentiation and a focus on full-price sell-through. This has led to fewer discounts and better sales performance across the board.

9. Question: "What is the roadmap for utilizing cash flows for potential acquisitions?"

Answer: While we are open to acquisition opportunities that align with our strategy, our current focus remains on scaling existing brands. We are confident in self-funding our operations without needing external capital.

These key questions highlight company performance, strategic focus, and considerations for the future, providing insights into Arvind Fashions' operational effectiveness and consumer engagement strategies.