Campus Activewear Limited — Q1 FY26 earnings call

Call held 13 Aug 2025

Management summary

Campus Activewear reported a mixed Q1 FY26, with revenue growing 1.4% and gross margins expanding to 55.4% driven by premiumization and strong sneaker sales (150% growth). However, volume declined by 11.6% and online sales were impacted by a 15-20 day disruption due to a complex raw material warehouse consolidation and SAP implementation. Management expressed confidence in recovery from Q2 and reiterated double-digit growth and 17-19% EBITDA margin aspirations for the full year.

Highlights

  • Revenue grew by 1.4% during the quarter, driven by 8% growth in the distribution channel and 20% growth in large format stores.

  • Gross margins expanded by 210 basis points, from 53.3% in Q1 FY25 to 55.4% in Q1 FY26, primarily due to higher ASP and premium product mix.

  • The sneaker category achieved a remarkable 150% growth, selling 550,000 pairs versus 220,000 pairs last year, reinforcing commitment to stylish, high-quality footwear.

  • Average Selling Price (ASP) increased by 14.7% Y-o-Y from Rs. 586 in Q1 FY25 to Rs. 671 in Q1 FY26, reflecting premiumization efforts.

  • EBITDA for Q1 FY26 was INR 55.4 crores, with an EBITDA margin of 15.9%, an improvement of 10 basis points versus last year.

  • Successful implementation of SAP and stabilization of a new raw material warehouse, which doubled throughput capacity to 200,000 pairs a day.

Concerns

  • Volume declined by 11.6% year-on-year, selling approximately 5.1 million pairs of footwear.

  • Online channel sales were impacted during the transition period, resulting in sales loss during the first fortnight and a de-growth of 8%.

  • PAT margin dropped from 7.4% last year to 6.4% in the current year, driven by higher depreciation on capacity enhancement investments.

  • The raw material warehouse consolidation took longer than anticipated, causing a 15-20 day disruption in online supply.

Key financials

  1. Revenue ₹343.3 Cr +1.4%YoY
  2. Volume 5.1 million pairs -11.6%YoY
  3. Average Selling Price (ASP) ₹671 +14.7%YoY
  4. Gross Margin 55.4%
  5. EBITDA ₹55.4 Cr
  6. EBITDA Margin 15.9%
  7. PAT ₹22.2 Cr
  8. PAT Margin 6.4%

What they filed

Q1 FY27: revenue up 12.2%, net profit up 18.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue333 515 406 343 387 +16%589 +14%456 +12%385 +12%
EBITDA38 82 71 49 50 +32%110 +34%82 +15%55 +12%
Net profit14 46 35 22 20 +43%64 +39%44 +26%26 +18%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · this year · Medium confidence 17-19%
    Yes, Gaurav. We continue to aspire to go back to the old days. 17% - 19% is what we have been highlighting always. So, that is what we aspire to achieve.

    — Sanjay Chhabra

Volume

  • Sneaker Volume Growth Volume · quarter-on-quarter · Medium confidence 15-20%
    But then if we get into a quarter-on-quarter comparison, 5 lakh pairs per quarter is a decent number and from here on, our growth will be normal, let us say 15%, 20%, right?

    — Sanjay Chhabra

Revenue

  • Online Sales Growth (without disruption) Revenue · Q1 FY26 (hypothetical) · Medium confidence high single digits
    Otherwise, we would have gotten at least higher single-digit growth in the online as well.

    — Nikhil Aggarwal

  • Overall Sales Growth (without disruption) Revenue · Q1 FY26 (hypothetical) · Medium confidence 6-7%
    So, assuming that this would not have happened, you are saying that your overall sales would have grown in something like 6%, 7%? Is that correct?

    — Umang Mehta

Market context

  • Revenue Growth Revenue · FY26 · Medium confidence double-digit
    So, I mean, that is all I can point to here. I mean, there was, of course, abnormal amount of rainfall this year. But I do not see a disruption beyond any point for that. So, it is manageable, and we have been able to do fairly well so far.

    — Nikhil Aggarwal

What to watch in Q2 FY26

Online Channel Sales Recovery

next quarter (Q2 FY26)
Current 8% de-growth in Q1 FY26 due to 15-20 day disruption
Target Recovery and growth in online sales

Why it matters

Online channel is a significant part of sales, and its recovery is key to overall growth targets.

However, online channel sales got impacted during this transition, resulting in sales loss during the first fortnight. During the quarter, our volume declined by 11.6%, however, the impact was largely offset through higher ASP, higher margin product mix. The decline in volume was driven by muted demand in the online channel and

Risks & concerns

  • Disruption from internal transitions (warehouse consolidation & SAP)

    high

    Raw material warehouse consolidation and SAP implementation took longer than anticipated, causing a 15-20 day disruption and impacting online sales.

    Management acknowledged

  • Muted demand and macroeconomic headwinds

    medium

    The company operated in a challenging macro environment with muted demand, particularly in the online channel.

    Management acknowledged

  • Intense competition in lower price points

    medium

    There is intense competition on the ground, with unorganized players cutting prices in the lower price point segments.

    Management acknowledged

  • Industry-wide non-BIS inventory

    medium

    Non-BIS inventory still exists in the system across brands, with benefits for local players like Campus yet to fully materialize as it clears by June 2026.

    Management acknowledged

Q&A highlights

7 direct
Decline in online sales and recoupability Direct
We basically had a very large transition of the raw material warehouse, which I called out. So, we consolidated three warehouses into one... we unfortunately could not supply enough material for the online-led marketplace. And that is where we sort of lost out on the growth over 15 days, I would say. 15 to 20 days.

Clarified the root cause of online sales decline (internal transitions) and quantified the duration of disruption.

Asked by Gaurav Jogani

Benefits of warehouse consolidation Direct
Now, the new warehouse gives us a capacity of, in a mature state and a high-throughput state, we can easily go up to 200,000 pairs a day. So, it is basically doubling of the capacity of the throughput. And what this does is this de-bottlenecks the entire supply chain.

Quantified the capacity increase and strategic benefit of the new warehouse, indicating future operational efficiency.

Asked by Gaurav Jogani

Consistency of guidance delivery (double-digit growth, 17-19% margins) Partial
Yes, you are right on delivery misses on occasion. But if you look at it on a consistent basis and on an annual basis, you will see that there is improvement on the EBITDA margin front... And these transitions, both SAP implementation and consolidating RM warehouse are part of that. I mean, we are always keeping in view one year forward, how we augment the capacities to take care of the future demand growth and these are building blocks.

Analyst challenged management's track record on guidance; management acknowledged misses but attributed Q1 to significant, complex internal transitions, maintaining long-term optimism.

Asked by Priyank Chheda

ROI of advertising and promotion (A&P) spend during sales disruption Direct
Priyank, needless to say that A&P spends always have a lag in terms of realization, in terms of sales. And as we mentioned in the opening remarks, that this de-growth in online was a channel-specific phenomena, which required a certain set of finished goods.

Addressed concerns about continued high ad spend during a challenging quarter, explaining the lag effect and channel-specific nature of the online de-growth.

Asked by Priyank Chheda

Reasons for ASP increase and regional trends Direct
One is our disproportionate focus on the sneaker category, which is definitely extremely premium and very high ASP... Secondly, there was, we did slow down on the lower margin, lower MRP, DIP school shoes and some bit of sandals and slippers, which were not very margin accretive and very, very low value.

Clearly explained the two main drivers of ASP increase: premiumization towards sneakers and strategic reduction in lower-margin products, with no significant regional trends.

Asked by Shraddha Kapadia

Impact of BIS regulation on the industry and Campus Direct
The benefits are yet to be fully materialized as there is still inventory in the system, non-BIS inventory for all the brands... So, the benefit has started coming in but I believe the bulk of it is yet to come.

Provided an update on the ongoing BIS regulation impact, indicating that while benefits are starting, the major impact is still to be realized as industry-wide non-BIS inventory clears.

Asked by Sameer Gupta

Why the 15-20 day disruption primarily affected online channels Direct
We firstly had sufficient stock on the distribution side... On the online side we got impacted mostly on these specific articles which were high movers and the outright sale in the marketplace, right? So, both areas got affected. With respect to because they were already on a lower base of inventory so that is where the impact was more significant.

Clarified the differential impact of the disruption, explaining why online sales were more affected due to lower inventory base for high-demand items compared to the distribution channel.

Asked by Sameer Gupta

Strategy for gaining market share in higher premium segments (Rs. 2000+) Direct
Yes, that is exactly what we are working on. So, sneaker is one portfolio, which is helping us bridge that gap. And Rs. 2,000 plus onwards, we have a fantastic range of sneakers, which is already there. And, of course, there is a lot more in the pipeline, which is about to get launched.

Highlighted the company's strategic focus on the premium segment, particularly through its growing sneaker portfolio, to compete with international brands.

Asked by Yash Kinwalsara

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Campus Activewear reported a revenue of INR 343.3 crores for Q1 FY26, marking a 1.4% year-on-year growth. This was achieved despite a challenging macro environment and significant internal transitions. The company's volume declined by 11.6% year-on-year, selling approximately 5.1 million pairs of footwear. However, the Average Selling Price (ASP) increased by 14.7% to Rs. 671, largely offsetting the volume decline.

Impact of Internal Transitions and Online Sales

The quarter was affected by two major internal transitions: stabilizing a new raw material warehouse and implementing SAP. The warehouse consolidation, which merged three facilities into one, took longer than anticipated, causing a 15-20 day disruption in supply. This particularly impacted online channel sales, leading to an 8% de-growth and sales loss during the first fortnight. Management noted that the blackout period for SAP was shorter than expected, allowing normal business operations to resume by the second week of April 2025.

Premiumization Strategy and Sneaker Growth

Campus Activewear's premiumization strategy yielded positive results, with gross margins expanding by 210 basis points to 55.4% (from 53.3% in Q1 FY25). This was driven by a disproportionate focus on the sneaker category, which achieved a remarkable 150% growth, selling 550,000 pairs compared to 220,000 last year. The company also consciously scaled down lower-margin products like DIP school shoes, slippers, and sandals, further contributing to margin improvement.

Distribution Channel Performance and Market Initiatives

The distribution channel demonstrated strong performance, growing by 8%, while large format stores saw a 20% growth. The company hosted its largest-ever distributors meet, SHOECASE 2025, and is conducting numerous retailer meets across the country. These initiatives, coupled with a curated portfolio of new styles and a new digital campaign 'Aye Bro, Capsule Pro', are enhancing growth visibility and demand recovery.

BIS Regulation and Future Outlook

Management indicated that the benefits from the BIS regulation are just beginning to materialize, with the bulk expected to accrue as non-BIS inventory clears from the market by June 2026. The company remains optimistic about achieving double-digit revenue growth for FY26 and aspires to reach an EBITDA margin of 17-19%. Recovery is expected from Q2 FY26, with July sales already showing positive momentum.

Manufacturing Capacity Augmentation

To bolster manufacturing efficiency and meet peak demand, Campus Activewear commenced production of uppers at its Paonta Sahib facility in Himachal Pradesh starting August 1, 2025. This strategic move is expected to further support the company's growth trajectory.

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