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    Khadim India Q4 FY26 earnings call

    KHADIM
    Consumer Durables·26 May 2026
    Management Summary

    Khadim India reported a challenging Q4 and full FY26 with revenue declines, primarily due to muted consumer demand and strategic store rationalization. Despite this, the company saw improved Q4 gross margins and volume growth QoQ, driven by premiumization efforts and category diversification. Management completed a demerger and is focused on disciplined execution, inventory optimization, and achieving stable profitability in FY27.

    Highlights

    5

    • Q4 FY26 Gross Profit Margin improved to 51.5%, indicating a positive trend from the full-year FY26 margin of 48.9%.

    • Sales volume in Q4 FY26 increased by 16.67% QoQ to 14 lakh pairs.

    • Successful demerger of the distribution and manufacturing segments into KSR Footwear Limited, aiming for sharper operational focus.

    • Strong growth observed in the TFM portfolio (46% YoY in FY26) and British Walkers (6% YoY in FY26).

    • Deliberate inventory correction completed, allowing for procurement of new season products and reduction of discounted stock.

    Concerns

    4

    • FY26 revenue from operations declined by 12.17% YoY to INR 367.1 crores, reflecting a challenging year for the footwear industry.

    • Muted consumer demand and continued pressure on discretionary spending impacted overall throughput and store productivity.

    • Management acknowledged some sales were lost in Q4 FY26 due to the deliberate reduction in inventory.

    • Raw material prices have increased by 20-25% recently, posing a challenge to margin maintenance.

    Key financials

    Metrics

    18

    Periods

    3

    Headline

    3
    • Total Stores
      851 stores
    • Company-Owned Outlets (COCO)
      189 outlets
    • Franchise-Operated Outlets
      662 outlets

    Q4 FY26

    8
    • Revenue
      ₹83.6 Cr
      YoY-10.9%
    • Gross Profit
      ₹43.1 Cr
    • Gross Margin
      51.5%
    • EBITDA
      ₹11.9 Cr
    • EBITDA Margin
      14.3%

    FY26

    7
    • Revenue
      ₹367.1 Cr
      YoY-12.2%
    • Gross Profit
      ₹179.6 Cr
    • Gross Margin
      48.9%
    • EBITDA
      ₹49.1 Cr
    • EBITDA Margin
      13.4%

    Segment breakdown

    TFM Portfolio
    46% FY26 Growth
    British Walkers
    6% FY26 Growth
    List

    Capital allocation

    2
    medium confidence
    CategoryHeadline
    M&A

    KSR Footwear Limited

    divestment · closed

    Liquidity

    Liquidity disclosed

    Company has working capital limits available and not fully utilized, expecting to manage cash flow through collections from EBOs.

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    EBITDA Margin
    14%
    		High
    Profitability
    Gross Margin
    49-50%
    		Medium
    Profitability
    PAT Margin
    2-2.5%
    		Medium
    Revenue
    Revenue
    INR 400 crores
    		High
    Debt
    Net Debt
    INR 110-115 crores
    		High
    Distribution
    COCO Stores
    200
    		High

    What to watch in Q1 FY27

    5

    Gross Margin Improvement

    Next quarter (Q1 FY27) / Spring-Summer season
    Current48.9% (FY26), 51.5% (Q4 FY26)
    Target49-50% (upper side) or 50 bps improvement from FY26

    Why it matters

    Gross margin recovery is crucial for overall profitability, driven by new season products and increased ASP.

    So you'll see that the gross margin remains more or less in the upper side of around 49% to 50%.

    Risks & concerns

    4
    RiskSeverity

    Muted consumer demand and pressure on discretionary spending

    FY26 was a challenging year for the footwear industry due to soft demand, particularly in mass and value segments, impacting throughput and store productivity. — Management acknowledged

    high

    Inventory rationalization leading to lost sales

    A deliberate call to reduce inventory and creditors in Q3 and Q4 FY26 resulted in some lost sales, but was deemed necessary for better working capital management and product mix. — Management acknowledged

    medium

    Raw material cost inflation

    Raw material prices increased by 20-25% from February, posing a challenge to maintaining gross margins and competitive pricing. — Management acknowledged

    medium

    Demand weakness and political turmoil impacting FY27 targets

    Management identified demand weakness and political turmoil as risks to achieving the INR 400 crores revenue target for FY27, though they believe the target is achievable. — Management acknowledged

    medium

    Q&A highlights

    8

    “See, in the last 2 years, we have seen degrowth, but the degrowth has come mainly because there is a closure of stores. And also, there is a less push of primary sales to the franchisee. But once this store closure has been done, I think there will be no new further store closure. So there, also the sales will remain the same and also some correction in the EBO for not doing some primary sales will happen this year, but already last year, you could see we have reduced our cost and we have done many cost-effective exercises. So with the revenue remaining at around INR400 crores, again, next year, we will remain steady at the EBITDA level of 14%.”

    Analyst questioned how the company plans to maintain its EBITDA margin despite past operating deleverage, and management provided a clear strategy focusing on stable revenue, cost control, and completed store rationalization.

    asked by Raj Patel

    3 min read7 chapters

    Detailed Narrative

    01

    Q4 FY26 and Full-Year FY26 Financial Performance

    Khadim India reported Q4 FY26 revenue from operations at INR 83.6 crores, a decline from INR 93.8 crores in the prior year. Gross profit for the quarter was INR 43.1 crores (51.5% margin), EBITDA was INR 11.9 crores (14.3% margin), and PAT was INR 0.77 crores (0.9% margin). For the full FY26, revenue stood at INR 367.1 crores, a 12% decline from FY25's INR 418 crores. Full-year gross profit was INR 179.6 crores (48.9% margin), EBITDA was INR 49.1 crores (13.4% margin), and PAT was INR 3.1 crores (0.9% margin).

    02

    Challenging Market Environment and Strategic Response

    FY26 was characterized by a challenging footwear industry with muted consumer demand and pressure on discretionary spending, particularly in mass and value segments. Despite this, Khadim focused on disciplined execution, inventory rationalization, prudent cost management, and strengthening its product portfolio. The company continues to prioritize premiumization and category diversification, with athleisure showing good traction and the TFM portfolio growing 46% YoY in FY26, while British Walkers grew 6% YoY.

    03

    Operational Discipline and Inventory Management

    The company maintained a cautious approach to inventory and working capital management, leading to a sharp reduction in inventory by approximately 40% year-on-year. While this resulted in some lost sales in Q4 FY26, it was a deliberate strategy to reduce creditors and clear discounted stock. Management stated that inventory correction is complete, and they will now increase inventory for new seasons, focusing on good stock and reducing discounted items, aiming for a stock level to suffice INR 400 crores sales by H1 FY27.

    04

    Store Rationalization and Distribution Network

    Khadim's retail footprint as of March 31, 2026, comprised 851 stores (189 company-owned, 662 franchise-operated). The company has closed around 60 stores in the last two years as part of a strategy to focus on profit-making stores and e-commerce. The target steady-state for company-owned (COCO) stores is around 200. The company is also focusing on opening more franchise stores (FRM/TFM model) where the stock is on their side, offering better margins and lower investment compared to COCO stores.

    05

    Demerger and Corporate Restructuring

    During FY26, Khadim completed the demerger of its distribution business and manufacturing segment into KSR Footwear Limited. This strategic restructuring is intended to enable sharper operational focus and improve efficiencies across the respective businesses over the medium term⏳. The demerger also impacted the reported equity and cash levels due to transfer.

    06

    Outlook and Future Priorities

    Despite near-term demand uncertainty, Khadim remains cautiously optimistic💬 about gradual recovery. Key priorities include strengthening the core portfolio, driving premiumization, expanding presence in high-potential markets, improving operational efficiencies, and maintaining financial discipline. The company targets FY27 revenue of approximately INR 400 crores with an EBITDA margin of 14% and expects gross margins to be in the 49-50% range, with a potential PAT margin of 2-2.5% conditional on sales growth.

    07

    Raw Material Cost and Pricing Strategy

    Raw material prices have increased by 20-25% since February. While this poses a challenge, Khadim is working to manage this by increasing MRP (for retail) and maintaining competitiveness without reducing gross margins. The company noted that price volatility in raw materials, particularly petroleum products, is a key component affecting their segment.

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