Credo Brands Marketing Limited

Credo Brands reported revenues of INR119.9 crores for Q1 FY26, which remained steady compared to the previous period. Gross profit stood at INR73.8 crores, resulting in a gross profit margin of 61.6%, an expansion of 290 basis points year-on-year. EBITDA for the quarter was INR31 crores, with an EBITDA margin of 25.9%, while Profit After Tax was INR6.3 crores, yielding a PAT margin of 5.3%.

The company is undergoing a significant retail transformation to position Mufti as a premium brand. This involves reinventing stores with new designs, costing INR32-35 lakhs per store (up from INR25 lakhs), and opening approximately 20 new premium stores, including flagships, in FY26. Concurrently, 10-20 existing stores will be renovated, and underperforming stores will be closed, aiming to improve network productivity rather than just increasing store count. This transformation is expected to continue into FY27.

Credo Brands has intensified its digital marketing efforts through partnerships with Google and Meta, leading to a more than doubling of digital sales via its own website year-on-year. The company plans to significantly increase its advertising and marketing spend to 6-7% of revenue in FY26 and 8-10% in FY27. These investments are strategic, aimed at amplifying brand storytelling, increasing reach, and reinforcing Mufti's premium positioning, with benefits expected to materialize from FY28 onwards.

The broader apparel industry is experiencing macroeconomic uncertainty^🌐 and cautious consumer behavior, leading to softness in discretionary spending, particularly in Tier 2 and Tier 3 markets. Management noted that fashion brands were hit harder than basic ones in Q1. The company does not foresee an immediate demand recovery, expecting Q2 to be flattish and projecting flattish or very small single-digit revenue growth for the full FY26.

The reported gross profit margin of 61.6% in Q1 FY26 was notably higher due to a strategic decision to delay discount sales by two weeks in response to low footfalls and market conditions. Management clarified that this high margin is temporary and expects it to rationalize to the normal range of 56-57% by the end of FY26. This normalization will occur as the company aligns its discounting strategy with market dynamics.

Management addressed concerns about competition from value retailers like Zudio and Trends, asserting that Mufti operates in a distinct premium segment with a different audience and price point. The company's strategy focuses on premiumizing the brand experience, look, and feel, rather than increasing product prices. They are confident in Mufti's unique offering and its ability to grow its customer base through digital marketing and enhanced retail presence.