ABLBL

Aditya Birla Lifestyle Brands Limited reported a steady performance in Q2 FY26, with revenue growing 4% year-on-year to INR2,038 crores. Consolidated EBITDA increased by 12% to INR338 crores, up from INR301 crores in the same quarter last year. This led to an EBITDA margin expansion of 125 basis points, reaching 16.6% from 15.3% year-on-year, reflecting improved operating efficiency. The company also achieved a PAT of INR23 crores, a significant turnaround from a loss of INR59 crores in the previous quarter.

Lifestyle Brands demonstrated strong growth, with revenue rising 7% year-on-year to INR1,754 crores and achieving a 12% retail like-to-like growth. The Emerging Businesses segment experienced a revenue decline, primarily due to the closure of Forever 21, which impacted overall growth by 1%. However, this segment still delivered a robust 11% like-to-like growth, with Van Heusen Innerwear retail sales growing over 20% and American Eagle like-to-like sales at 9-10%.

The expansion in EBITDA margin was attributed to a combination of factors, including cost reduction initiatives and rent leverage gained from strong like-for-like sales. The company noted that fixed costs, particularly rent for company-owned stores, were spread across a larger sales base. Additionally, multiple cost reduction programs contributed to margin improvement across both lifestyle and emerging businesses, with Van Heusen Innerwear's profitability improving by 150 bps due to lower losses.

ABLBL continued to expand its retail footprint, adding over 75 new stores in Q2 FY26, including 60+ for Lifestyle Brands and 20+ for Reebok, bringing the total network to 3,250 stores across 4.7 million square feet. The company also undertook aggressive store renovations, completing 65 company-owned store upgrades in the quarter. These renovations, while causing temporary disruption equivalent to 130 store months, are part of a strategy to upgrade and expand store formats, enhancing consumer experience.

The GST transition, particularly the shift from 5% to 18% for items above INR2,625, caused temporary moderation in overall momentum, especially affecting wholesale businesses due to reconfiguring purchase order systems. Management highlighted strong double-digit like-to-like growth in small-town India (Tier 4 towns), indicating a recovery in these markets. However, despite the early onset of the Pujo season and a decent Diwali, a broader increase in market consumption is 'not yet visible,' and the full impact of the wedding season is still unfolding.

The company's finance costs decreased due to effective management of borrowings and interest rate reductions. Working capital increased this quarter, primarily due to an early inventory build-up for the festive and wedding seasons, coupled with supply chain uncertainties from Bangladesh. Management expects debt levels to reduce by the end of FY26, and clarified that a QoQ reduction in rent expense (INR13 crores from INR163 crores to INR150 crores) was due to changes in business models (franchisee to COCO conversions) and front-loaded depreciation.