Aditya Birla Fashion and Retail Ltd (BOM:535755) (Q1 2027) Earnings Call Highlights: Revenue ...

Q & A Highlights

Q: What is the consumer response to the OWND format, and how much of the Pantaloons segment's revenue and EBITDA contribution came from OWND in Q1? A: Ashish Dikshit (Managing Director) stated that Pantaloons grew 7.5% of the total segment growth of 10%, with OWND contributing the remaining 2% to 2.5% incrementally. OWND is still in an investment phase and has actually taken away some of the segment's profit. The company is still watching the format's profitability and plans to add more stores in the second half of the year, with an expansion plan of about 20-22 stores for the first half.

Q: TMRW saw slower revenue scale-up in Q1. What is the strategy, and should we expect this momentum to sustain? A: Ashish Dikshit (Managing Director) explained that TMRW has grown close to 25% annually over the last three years, though last year's same quarter was much higher at 39%. This quarter, primary sales grew 11% while secondary sales grew faster at 16-17%. The company expects TMRW to continue on a 20%-plus revenue growth rate for the year, with a focus on reducing losses and achieving brand-level cash profitability over the next 12 to 18 months.

Q: Should we assume FY27 remains a year of investments, with improved profitability only from FY28 onwards? What are the period-ending cash and debt numbers? A: Ashish Dikshit (Managing Director) indicated that losses will reduce on an annual basis this year, with FY28 seeing even lower losses, and FY29 is the year when the portfolio will become fully profitable. Jagdish Bajaj (CFO) added that the company started the year with roughly INR1,150-1,200 crore in cash, now has approximately INR1,000 crore, and expects to end the year with around INR500 crore. He also noted that TMRW has already raised INR500 crore for its growth plan, so no further contributions are needed from the parent.

Q: Pantaloons' like-to-like growth moderated from 14% to 4% this quarter. How would the number look if adjusted for Adhik Maas? A: Ashish Dikshit (Managing Director) clarified that the Q4 14% growth was partly due to a shift in EOSS. From November onwards, the business had grown with like-to-like of 7-7.5%. April started lower, May was much better with significant double-digit growth, but June came down again, resulting in a modest 4% for the quarter. The company hopes to improve this to achieve annual like-to-like growth of at least high-single digits.

Q: How should we read the consumer demand sentiment on the ground? A: Ashish Dikshit (Managing Director) stated that demand has been quite steady, though not strong, and the fear of demand reversal hasn't materialized. However, the company is moving into a slightly more inflationary phase in the second half of the year. The quarter's revenue growth was more impacted by wedding-wear businesses, which faced specific marriage date-related issues and a longer Adhik Maas, which is more pronounced in their business.

Q: On OWND, with 90 stores now, what early markers give you confidence in the product-market fit? A: Ashish Dikshit (Managing Director) said the company is measuring like-to-like growth, gross margin, and sell-through as key parameters. They haven't reached a point of pressing the accelerator and still have work to do. A new management team has been brought in, and over the next three to five months, they will closely watch how changes to the format play out. The best reflection would be store profitability, which is currently just about breaking even; they need to get to slightly better profitability before pressing the pedal.

Q: On TCNS, the reported revenue growth differs from Retail growth, and LTL has come down from 7-8% to 2%. What led to this? A: Ashish Dikshit (Managing Director) acknowledged this was a disappointing quarter for organic performance. The business had delivered consistent double-digit growth for four to five quarters, but this quarter's like-to-like was only about 2%. A part of the slowdown was due to the previous 12-15 months of reducing old inventory, which created a high liquidation base. While growth came down, margins were slightly better than last year. The company expects to get back to high-single-digit and early double-digit like-to-like growth, with work on contemporizing the brand playing out in the second half.

Q: What is the inflation you are seeing for Pantaloons and OWND, and how should we think about margins for Q2 and the second half? A: Ashish Dikshit (Managing Director) reported inflation of close to 4%-plus in both businesses. For Pantaloons, the company has chosen to pass on only half of the price increase to avoid impacting the customer, hoping to recover the rest through better sell-through and higher sales. Some gross-margin impact is expected in the second half. For OWND, they are still getting the format proposition right and are less worried about margins at this point.

Q: What growth can we anticipate for the Ethnic segment for the full year, given TCNS is slow? A: Ashish Dikshit (Managing Director) stated that Q1 was significantly impacted by fewer wedding dates and lower international travel-related weddings, affecting the designer-wear part. The company expects the Ethnic segment to perform 20%-plus at an overall level, despite the drag from TCNS, which is expected to return to early double-digit growth. The year is skewed, with H2 likely to be significantly higher than H1 for the entire Ethnic portfolio due to festival date shifts.

Q: For Galeries Lafayette, what is the revenue run rate, and what is the current level of operational loss? A: Ashish Dikshit (Managing Director) declined to give this level of detail for the initial business but confirmed it is still operationally loss-making due to overheads not being covered by the early-stage business size. He indicated that between The Collective business and Galeries Lafayette, they expect to break even at a combined level in the second half of this year.

Q: On TCNS, why is

For the complete transcript of the earnings call, please refer to the full earnings call transcript .