Arvind Fashions.

Arvind Fashions reported a robust Q2 FY26, with Net Sales Value (NSV) reaching ₹1,418 crores, marking an 11.3% year-over-year growth. EBITDA also saw a significant increase of 17.6% to ₹200 crores, accompanied by an 80 basis points margin expansion. Profit After Tax (PAT) grew by 23.3% to ₹37 crores, underscoring the company's focus on profitable growth. The direct channels, comprising retail and B2C, were key contributors, now accounting for nearly 50% of total sales, a 5 percentage point increase from the previous year.

The government's implementation of GST 2.0, which reduced rates for articles priced under ₹2,500 from 12% to 5%, is expected to positively impact consumer demand in the medium term. While the wholesale channel experienced a minimal impact from destocking in Q2 due to this transition, management anticipates a return to growth in H2. Conversely, the online B2C channel demonstrated exceptional growth of over 50%, increasing its share to 12% of total sales, while the online B2B share dropped to 20% from 22% last year, aligning with the strategy to pivot away from online B2B.

U.S. Polo continued its strong performance, growing exceptionally at approximately 21%, driven by product innovation, premiumization, and new retail identity. Other brands, however, experienced muted growth due to the GST regime transition. The footwear segment, having overcome disruptions from BIS norms, grew by over 25%, with management aiming to double its size in the next three years. Overall, adjacent categories, including footwear, innerwear, and womenswear, collectively grew by 22%, indicating successful portfolio diversification.

Gross margin improved significantly by 210 basis points to nearly 53%, primarily due to a 90 basis points reduction in retail discounting and a richer channel mix. Despite higher advertising campaigns (up 20 basis points) and an 18% sequential increase in employee costs (10% from salary correction, rest from one-time^📎 management change costs), EBITDA margin expanded by 80 basis points. Management expects employee costs to normalize in the coming quarter and remains confident in achieving the guided 50-80 basis points EBITDA margin expansion for FY26.

The company's strategy revolves around doubling down on its portfolio of five strong brands, ensuring sharp brand positioning, and delivering differentiated products. A key focus is on understanding and catering to consumer preferences through data-backed segmentation and enhanced marketing capabilities. Management aims to increase the share of direct channels (retail and B2C) from the current 50% to a range of 50-70% in the next few years, leveraging technology across all aspects of the business, from data analysis to channel management, to drive accelerated growth.