Sai Silks

Sai Silks reported an almost flat revenue from operations of INR375 crores in Q1 FY27, compared to INR379 crores in Q1 FY26, representing a -1.05% year-on-year degrowth. Same-store sales growth (SSSG) experienced a significant degrowth of 7.5% to 7.8% during the quarter. EBITDA margins declined by approximately 1%, primarily due to the SSSG degrowth and fixed costs spread over lower volumes. Despite these challenges, gross margins remained resilient, holding close to 42%, attributed to continued pricing discipline and effective merchandise mix management.

The weak Q1 FY27 performance was largely influenced by the Adhik Maas period, which fell from May 17 to June 15, traditionally considered inauspicious for major purchases like weddings and griha praveshams. This led to weak consumption trends, reduced footfall, and cautious discretionary purchasing behavior across markets. Management noted that this broader weakness in consumer demand is an industry-wide trend, not specific to Sai Silks.

The company continued its expansion, adding approximately 30,000 square feet of retail space during Q1 FY27, bringing the total store count to 83. As of June 30, 2026, the total retail footprint stood at 8,14,000 square feet across 4 states. For the full FY27, Sai Silks is targeting a net retail space addition of approximately 1,00,000 square feet, with potential for an additional 10,000-15,000 sq ft by Q4. The expansion is primarily focused on existing territories, with Karnataka leading, utilizing Kalamandir and Varamahalakshmi formats.

As part of ongoing efforts to optimize performance, Sai Silks plans to rationalize one KLM Fashion Mall store in Telangana that has shown sustained degrowth. This action reflects a commitment to disciplined capital allocation. Looking ahead, the company is actively exploring new market entries in Pune, Maharashtra, and Kerala, with these entries anticipated in Q4 FY27 or early Q1 FY28.

The innerwear category is showing positive momentum, with management expecting a 20% growth compared to last year. The fashion jewellery category, recently introduced in two new Kalamandir stores and now being phased into KLM stores, is still in its early stages. The strategy involves reallocating existing store space to accommodate these new categories and improve productivity.

Management provided an update on the utilization of IPO proceeds earmarked for warehouse development, which have been unutilized. Due diligence for identified locations is underway, and the company expects to close the deal and complete the entire utilization of these funds by the end of September 2026 (Q2 FY27).

For the full financial year FY27, Sai Silks maintains its revenue growth guidance of 12% to 15%. While Q1 saw negative SSSG, management expects positive SSSG of at least 2% to 3% for the full year, aiming to cover inflation with a 3-4% SSSG improvement. EBITDA margins are also expected to improve through the year, supported by SSSG improvement and operating leverage from maturing new stores. Gross margins are targeted to be maintained at current levels.

In response to an analyst's question comparing Sai Silks' performance to the high growth seen in the jewellery sector, management clarified that jewellery benefits from investment value and metal appreciation, which is not applicable to ethnic wear. They reiterated that for ethnic wear, the primary driver of Q1's degrowth was the Adhik Maas, impacting consumer behavior for wedding-related purchases.