Cantabil Retail India Limited — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Cantabil Retail reported a robust Q1 FY26 with strong revenue and PAT growth, driven by healthy same-store sales and volume expansion. The company is progressing towards its FY27 revenue target and has a clear CAPEX plan for warehousing and capacity. While EBITDA margin saw a minor dip and net store additions were modest this quarter, management remains confident in its strategic execution and market position, despite acknowledging a 'slightly challenging' July.

Highlights

  • Revenue of Rs. 159 crores, up 24% YoY, demonstrating strong top-line growth.

  • PAT of Rs. 14.7 crores, up 29% YoY, indicating improved profitability.

  • Same Store Sales Growth (SSG) of 11.3% highlights strong brand performance and customer loyalty.

  • Volume growth of 17.48% YoY, with balanced distribution across men's, women's, and kids' segments.

  • Management confirmed no increase in discounts and stable cotton prices, with any future inflation expected to be absorbed.

Concerns

  • EBITDA margin slightly declined to 30.8% in Q1 FY26 from 30.9% in Q1 FY25.

  • Net store additions were only 6 (24 openings vs 18 closures), though management aims for 1,20,000 sq ft area addition in FY26.

  • July sales were noted as 'slightly challenging' by management, potentially impacting Q2 performance.

Key financials

  1. Revenue ₹159 Cr +24.2%YoY
  2. EBITDA ₹49 Cr +25.6%YoY
  3. EBITDA Margin 30.8%
  4. PAT ₹14.7 Cr +28.9%YoY
  5. PAT Margin 9.2%
  6. SSG 11.3%
  7. Volume (pieces) 1.571 Mn +17.5%YoY
  8. Total Stores 605 stores
  9. Total Retail Area 8.06 lakh sq ft

What they filed

Q1 FY27: revenue up 12.6%, net profit up 6.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue151 223 220 159 176 +17%264 +18%253 +15%179 +13%
EBITDA35 72 58 49 42 +20%95 +32%78 +34%59 +20%
Net profit7 34 23 15 7 +0%45 +32%29 +26%16 +7%
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.

Capital allocation

high confidence
  • Capex ₹20 Cr
    • New warehousing and corporate facility
    • Existing plant capacity increase
    So near-term for the Financial Year '26, as we said in our earlier goals as well. So our big project of my new warehousing and corporate facility as well as this existing plant capacity increase, which will be costing additionally for this financial year FY '26, is approximately Rs. 20 crores to Rs. 25 crores and that will be finished.

Guidance & targets

SSG

  • SSG for remaining quarters SSG · remaining quarters of FY26 · High confidence 5-6%
    So, yes, my 11% this quarter has been done, and definitely, we are going to achieve 5% to 6% in the remaining quarter-on-quarter basis. So this year we should be better off or at least our earlier guidance should meet up.

    — Shivendra Nigam

Revenue

  • Revenue target Revenue · FY27 · High confidence Rs. 1,000 crores
    As far as FY '27 is concerned, everything is on plan, we have a fair chances to cross Rs. 1,000 crores revenue mark with 20% - 22% of CAGR growth, what we are doing, so this year also and FY '27 also, this mark is going to be achieved.

    — Shivendra Nigam

CAGR

  • CAGR growth for revenue CAGR · up to FY27 · High confidence 20-22%
    As far as FY '27 is concerned, everything is on plan, we have a fair chances to cross Rs. 1,000 crores revenue mark with 20% - 22% of CAGR growth, what we are doing, so this year also and FY '27 also, this mark is going to be achieved.

    — Shivendra Nigam

Marketing Expenses

  • Marketing expenses as % of sales Marketing Expenses · next couple of financial years · High confidence 1.5%
    So, our marketing expenses is broadly in the range of 1.5%, right? So, going forward also, at least for next couple of financial year, it will be in the same range.

    — Shivendra Nigam

Retail Area Expansion

  • Retail area addition Retail Area Expansion · FY26 · High confidence 1,20,000 square feet
    So, in the net addition is six stores, but the area we added is 21,000 square feet and we plan to add like 1,20,000 square feet in a year.

    — Deepak Bansal

E-commerce Growth

  • E-commerce segment growth E-commerce Growth · next two years · Medium confidence 8-10%

    From 6% today

    So, not only for the retail expansion, my E-commerce section which is 6% as of now, definitely going in next two years, so 8% to 10%.

    — Shivendra Nigam

Overall Growth

  • Overall growth Overall Growth · FY26 · High confidence 20%
    So this financial year, 5%, 6%, 7% same store sales growth, and expecting 20% of our overall growth is there.

    — Shivendra Nigam

What to watch in Q2 FY26

SSG achievement for remaining quarters

next quarter
Current 11.3% in Q1 FY26
Target 5-6% annual basis

Why it matters

To confirm if the strong Q1 SSG was an outlier or if the company can maintain its guided annual growth rate.

So, yes, my 11% this quarter has been done, and definitely, we are going to achieve 5% to 6% in the remaining quarter-on-quarter basis.

Risks & concerns

  • EBITDA to PAT margin conversion due to IndAS 116

    medium

    Analyst noted strong EBITDA but lower PAT margin. Management clarified this is due to IndAS 116 reclassifying rental costs into depreciation and finance costs, not actual interest expense, as the company is debt-free. Pre-IndAS EBITDA is 18-20%.

    Analyst acknowledged

  • Store closures impacting net expansion

    low

    18 stores were closed (7 relocations, 4 expired agreements, 7 net closures) against 24 openings, resulting in only 6 net additions. Management stated these were not strategic mistakes and are normal for a company with 600+ stores, reaffirming the full-year area expansion target.

    Analyst downplayed

Q&A highlights

7 direct
Volume growth distribution across segments Direct
approximately 82% in men, and the balance 10%, so the ratio is same and the volume is also grown in approximately same ratio in all the categories.

Confirms balanced growth across product categories, indicating broad market acceptance rather than reliance on a single segment.

Asked by Arnav Sakhuja

Macro demand situation (rural vs urban) Direct
demand situation has been quite good, because there was a very good marriage season this time, and there is a rebound in the macroeconomic sentiments also, because there has been rate of interest cut by the RBI. And there was an income tax benefit also given during the last budget, so overall sentiments in the markets are very positive.

Provides insights into the positive external factors contributing to strong sales performance, including consumer sentiment and government policies.

Asked by Arnav Sakhuja

FY26 CAPEX plan and purpose Direct
our big project of my new warehousing and corporate facility as well as this existing plant capacity increase, which will be costing additionally for this financial year FY '26, is approximately Rs. 20 crores to Rs. 25 crores and that will be finished.

Clarifies the specific investments planned for the current fiscal year, indicating strategic infrastructure and capacity enhancements.

Asked by Vishal Dudhwala

Free cash flow generation (post rent, working capital, CAPEX) Direct
my cash flow from operation, net of my rentals as well as taxes is approximately Rs. 22 crores, out of which I invested in inventory, because Q1 inventory on 30th June is always piled up to relish in Q2, that is approximately Rs. 20 crores. And additional payment to creditors has been made in the range of Rs. 15 crores... So for working capital, I paid Rs. 35 crores, which will be giving by net cash flow, which is Rs. 13 crores, which has been utilized from the opening balances. Apart from this, CAPEX investment which is going and CAPEX is approximately Rs. 18 crores. So, this is what the cash flow is. So, from opening balances I will be able to utilize Rs. 32 crores.

Provides a detailed breakdown of cash flow components, including working capital and CAPEX, offering transparency into liquidity management.

Asked by Bhargav

PAT margin differentiation (offline vs online) and IndAS 116 impact Direct
our online segment is giving us the lesser gross margins... overall, we are in above breakeven in our E-commerce business as well... contribution for E-commerce is only 6%... we are operating at a breakeven level, our E-commerce business... my 28% to 30% of EBITDA is post IndAS. That means my rental cost, which is Rs. 80 crore... has been converted into my depreciation as well as finance cost. However, the Company is completely debt free for last three, four financial years, and we do not have any interest cost. So this is the post IndAS number of 28% to 30%.

Clarifies the profitability dynamics of the online segment and explains how IndAS 116 significantly impacts reported EBITDA and PAT margins by reclassifying rental costs.

Asked by Chidananda Mohanty

Store closures and net additions Direct
opened 24 stores at the gross level. But there are some closures, 18 stores have got closed... seven were the relocations, four agreements were expired where we do not want to renew, because market was in bad shape for some reason, and seven were the net closures... net addition is six stores, but the area we added is 21,000 square feet and we plan to add like 1,20,000 square feet in a year.

Explains the reasons behind store closures and provides context for the net store additions, while reaffirming the full-year expansion target.

Asked by Pavan Kumar

Average revenue per square foot trend and profitability Direct
our revenue per square feet has gone down last year was because we have opened bigger stores. In bigger stores one used to have a less per square feet sale, but our rentals have gone down, our costs have gone down so EBITDA has increased. Our EBITDA is highest in the bigger stores. So, profitability wise Company is going to go further not go down. And we are trying to improve our SSG, so with the improvement in the area per square feet sales will also go up.

Clarifies the impact of opening larger stores on revenue per square foot and how this strategy contributes to higher EBITDA and overall profitability despite lower per-square-foot sales.

Asked by Tanmay Roy

Management satisfaction with share price Partial
we deserve better. Honestly, we are an underestimated Company, and we deserve better, what we feel... share price is dependent on the market forces of demand and supply and management has no role to play in it. So, it will be only determined by the market. Our work is to do hard work and do better strategy and execution part. So, we are doing that.

Reveals management's perception of the company's valuation, expressing a belief that it is undervalued, while reiterating their focus on operational performance.

Asked by Vikas Mehta

2 min read 6 chapters

Detailed narrative

Strong Q1 FY26 Financial Performance

Cantabil Retail delivered a robust Q1 FY26, with revenue growing 24% year-on-year to Rs. 159 crores, up from Rs. 128 crores in Q1 FY25. Profit After Tax (PAT) saw an even stronger increase of 29% to Rs. 14.7 crores, compared to Rs. 11.4 crores in the prior year. This performance was underpinned by a healthy 11.3% Same Store Sales Growth (SSG) and a 17.48% year-on-year volume growth, with approximately 1.571 million pieces sold in the quarter.

Strategic Expansion and Capacity Utilization

The company currently operates 605 stores across 8.06 lakh square feet and plans to add 1,20,000 square feet of retail area in FY26. Store expansion will maintain a 20:40:40 distribution across Tier-1, Tier-2, and Tier-3 cities. Manufacturing facilities are operating at 85-90% utilization, producing approximately 1.6 million garments last year against a capacity of 1.8 million garments per year.

FY26 Capital Expenditure and Debt-Free Status

Cantabil has outlined a CAPEX plan of Rs. 20-25 crores for FY26, primarily for a new warehousing and corporate facility and an increase in existing plant capacity. Management emphasized that the company has been completely debt-free for the last three to four financial years, with no interest costs, indicating strong financial health and reliance on internal accruals for growth.

Margin Dynamics and IndAS 116 Impact

While the reported EBITDA margin for Q1 FY26 was 30.8% (a slight dip from 30.9% in Q1 FY25), management clarified that the pre-IndAS EBITDA margin is in the range of 18-20%. This difference is attributed to IndAS 116, which reclassifies rental costs (approximately Rs. 80 crores) into depreciation and finance costs. Despite this, the rental cost per square foot has been decreasing, from Rs. 130 three years ago to Rs. 119 in FY25, due to the opening of larger format stores.

Positive Macro Environment and Inventory Management

Management noted a positive macro demand environment, driven by a strong marriage season, improved macroeconomic sentiments, RBI interest rate cuts, and income tax benefits. The company maintains a consistent discount policy with no recent increases and has not observed any significant changes in raw material (cotton) prices, expecting to absorb any future inflation. Inventory built up in Q1 is anticipated to be realized in Q2.

Long-Term Growth Vision and E-commerce Strategy

Cantabil is on track to achieve its Vision 2027 target of Rs. 1,000 crores in revenue, aiming for a 20-22% CAGR. This growth will be fueled by continued retail expansion, a 5-6% Same Store Sales Growth (SSG), and a targeted increase in the e-commerce segment's contribution from 6% to 8-10% over the next two years. The company also noted good traction from its newly started shoe business.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Textiles earnings calls