Detailed Narrative
Robust Q3 FY26 Performance Driven by D2C Channels
Arvind Fashions reported a strong Q3 FY26, with overall revenue growing 14.5% to INR 1,377 crores, marking the highest year-on-year growth in several years. EBITDA increased by 18% to INR 195 crores, accompanied by a 40 basis points margin expansion. The company's direct-to-consumer channels were a key growth driver, now accounting for nearly 63% of sales, a 260 basis points increase over the previous year.
Exceptional Online B2C and U.S. Polo Growth
The online B2C segment demonstrated robust growth of nearly 50%, increasing its contribution to 17% of total sales with significant improvements in channel margins. The U.S. Polo brand continued its strong momentum, achieving exceptional growth of over 25%, supported by product premiumization, targeted retail expansion, and strong performance in its adjacent categories, which all grew by more than 25%.
Strategic Focus on Flying Machine and Retail Expansion
Following the reacquisition of Flipkart's stake, Flying Machine is being repositioned as a Gen Z-focused brand, with a dedicated D2C platform planned for FY27. The brand is already showing 'green shoots' with 17% like-for-like growth in stores and approximately 40% growth in B2C. The company added over 41,000 square feet of retail space this quarter and aims for a net addition of 1.5 lakh square feet for FY26 across its portfolio.
Operating Leverage and Margin Improvement
Arvind Fashions has expanded its margins by 140 basis points over the last two years, driven by a focus on cost efficiencies and reduced discounting. Management expects EBITDA to grow more than 15% going forward⏳, attributing this to operating leverage derived from sourcing advantages with scale, increased productivity from high like-for-like growth, and fixed costs growing slower than revenue.
Inventory Management Amidst Geopolitical Risks
While inventory levels appeared higher, management clarified this was a conscious decision to inward inventory in late December. This proactive measure was taken to de-risk potential supply chain disruption🌐s related to upcoming elections in Bangladesh, which accounts for 15% of the company's product sourcing. Inventory turns are expected to normalize📎 to between 3.8 and 4 once the situation stabilizes.
Outlook and Confidence in Sustained Growth
Despite initial headwinds in PVH brands due to geopolitical supply chain issues and a GST rate increase from 12% to 18%, sales for these brands are now stabilizing. Management expressed confidence in maintaining a double-digit growth trajectory of 12-15% for the year, anticipating that government initiatives will further aid consumer disposable incomes and boost demand in the medium term.