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    Khadim India Limited

    KHADIM
    Consumer Durables·19 Aug 2025
    Management Summary

    Khadim India reported a challenging Q1 FY26 with revenue of ₹957 million and a gross margin of 47.7%, impacted by muted demand and increased promotional activities. Despite headwinds, the company focused on strategic initiatives, including a new partnership with Skechers and the launch of an athleisure segment, while also expanding its retail footprint to 884 stores. Management anticipates improved performance in the upcoming festive season, with a focus on optimizing margins and continued brand building.

    Highlights

    6

    • Strategic partnership with Skechers entered during the quarter to strengthen brand portfolio and consumer offerings.

    • New athleisure segment launched to cater to growing demand for comfort-driven wear.

    • Sub-brands British Walkers and Sharon showing encouraging growth trends and strong customer resonance.

    • Retail footprint expanded to 884 stores, comprising 207 Company-owned and 677 franchisee stores.

    • Degrowth in the lower segment price points of the Khadim brand has stopped, with some growth observed.

    • True Franchised Model (TFM) added ₹5 crores in turnover, with plans for more aggressive launches.

    Concerns

    6

    • Revenue from operations of ₹957 million was impacted by a decline in franchisee sales.

    • Gross margin compressed to 47.7% (from ~53% in Q1 FY25) due to price cuts (2.5% impact) and increased promotional discounts (discount sale contribution rose from 18% to 33%).

    • EBITDA margin was 12.9% and PAT margin was 0.9% for the quarter.

    • Muted demand during the quarter due to unpredictable weather and global developments, impacting consumer sentiment.

    • Franchisee sales weakness led to less primary sales from the company to avoid stock buildup at franchisee level.

    • Degrowth was more pronounced in Tier 2 and Tier 3 cities compared to metros.

    What Changed2

    vs Q2 FY26

    Guidance items8 → 6 (-2)Risks discussed4 → 5 (+1)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue from Operations957 Mn
    2. 02Gross Profit456.4 Mn
    3. 03Gross Margin47.7%
    4. 04EBITDA123.3 Mn
    5. 05EBITDA Margin12.9%

    Capital allocation

    1
    high confidence
    CategoryHeadline
    M&A

    Skechers

    Other · closed

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    Gross Margin
    48% to 49%
    		Medium
    Profitability
    Gross Margin
    a little bit improved from the Q1
    		Medium
    Profitability
    EBITDA Margin (retail business)
    around 16%
    		Low
    Volume
    Khadim Brand Volume Growth
    decent growth
    		Low
    Store Expansion
    Company-owned outlets
    around 7 to 10
    		High
    Store Expansion
    TFM franchises
    more aggressive store launches
    		Medium

    What to watch in Q2 FY26

    5

    Gross Margin

    Q2 FY26
    Current47.7%
    Target48% to 49%

    Why it matters

    Gross margin was significantly impacted this quarter; its recovery is crucial for profitability.

    But in the next quarter, there will be improvement in the gross margin because the festive week there will be no discount. And the margin will remain more or less in the range of 48% to 49%.

    Risks & concerns

    5
    RiskSeverity

    Muted consumer demand

    Unpredictable weather and global developments impacted overall consumer sentiment, resulting in muted demand during Q1 FY26. — Management acknowledged

    medium

    Decline in franchisee sales

    Franchisee sales were impacted, leading to a deliberate reduction in primary sales from the company to avoid stock buildup at the franchisee level. — Management acknowledged

    medium

    Gross margin compression

    Gross margin declined to 47.7% due to tactical price cuts (2.5% impact) and increased contribution from promotional discounts (from 18% to 33% of sales) to support volumes. — Management acknowledged

    medium

    Lower footfall

    Q1 experienced low footfall, which management hopes will improve during the festive season. — Management acknowledged

    medium

    Regional demand disparity

    Degrowth was more pronounced in Tier 2 and Tier 3 cities compared to metro areas. — Management acknowledged

    medium

    Q&A highlights

    8

    “No, this gross margin down, I think it was around 53% in the last quarter, in FY '25 1st Quarter. So mainly it is impacted through, one is that we have taken a price cut in Khadim product which has nearly contributed around 2.5% margin down. That we have already told in the last year that we will be taking a price cut to have an improved volume growth. And secondly, because of the discount trend which has been done. In the last year 1st Quarter our contribution of discount sale was around 18%, while this year the 1st Quarter contribution of discount sale is around 33%.”

    Analyst questioned the significant drop in gross margin, and management provided a detailed breakdown of the causes (price cuts, increased discounting) and future expectations for Q2.

    asked by Akhil Parekh

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Khadim India reported revenue from operations of ₹957 million for Q1 FY26, primarily impacted by a decline in franchisee sales. Gross profit stood at ₹456.4 million, translating to a gross margin of 47.7%, which was affected by promotional discounts. EBITDA for the quarter was ₹123.3 million, with an EBITDA margin of 12.9%, and profit after tax was ₹8.6 million, yielding a PAT margin of 0.9%.

    02

    Strategic Initiatives and Partnerships

    During the quarter, Khadim India entered into a strategic partnership with Skechers to offer their footwear in selected stores, reinforcing its commitment to value and variety. The company also launched a new athleisure segment to cater to the growing demand for comfort-driven wear. Additionally, small tie-ups like umbrellas for the monsoon season were implemented on a SOR basis in high footfall stores.

    03

    Margin Dynamics and Discounting Strategy

    The gross margin declined to 47.7% from approximately 53% in Q1 FY25. This was attributed to a 2.5% margin impact from price cuts on Khadim products and an increase in discount sale contribution from 18% to 33% of total sales. Management indicated that discounting would continue until August 31st, with expectations for gross margin to improve to 48-49% in Q2 due to the festive season.

    04

    Retail Footprint and Expansion Plans

    As of Q1 FY26, Khadim's retail footprint comprised 884 stores, including 207 Company-owned outlets and 677 franchisee stores. For FY26, the company plans to open around 7 to 10 new Company-owned outlets and pursue more aggressive launches of True Franchised Model (TFM) stores, which have already contributed ₹5 crores in turnover this year.

    05

    Market Conditions and Demand Outlook

    The quarter experienced muted demand due to unpredictable weather and global developments, leading to lower footfall. Management noted that degrowth in the lower price points has stopped, with some growth observed. They are optimistic about a pick-up in consumer demand during the upcoming festive season, which is arriving earlier this year, particularly Durga Puja in September.

    06

    Brand Building and Tier 2/3 Strategy

    Khadim is focusing on strengthening its brand image through various initiatives, including festive catalog ads and promoting sub-brands like Sharon and British Walkers. For Tier 2 and 3 towns, which are more price-sensitive and experienced more degrowth, the strategy involves launching products below ₹499 and utilizing influencer marketing to reach consumers effectively.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.