Credo Brands Marketing Limited — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

Credo Brands reported a challenging Q3 FY26 with revenue and PAT declines, primarily due to a muted apparel market and temporary gross margin impact from GST reforms. Despite this, the company is progressing with its MUFTI 2.0 transformation, opening new premium stores and increasing marketing spend to strengthen brand equity. Management expects profitability to be impacted in the short-term due to these investments but remains confident in long-term growth and a demand pick-up from Spring/Summer '26.

Highlights

  • 12 stores under the new retail identity have been opened with encouraging initial consumer and trade response.

  • Working capital days reduced to 179 days as of Q3 FY26 compared to 217 days as of H1 FY26, reflecting stronger collections and tighter credit discipline.

  • Cash flow from operations for December '25 stood at INR115 crores.

  • Online business grew by 87% over the last year, indicating strong digital channel performance.

Concerns

  • Q3 FY26 revenue from operations stood at INR146.1 crores, a decline from INR156 crores in Q3 FY25 (-6.35% YoY).

  • PAT for Q3 FY26 was INR7 crores.

  • Gross margins were temporarily impacted by recent GST reforms, leading to a Q3 GP margin of 56.5% compared to 58.2% for 9 months FY26.

  • Q3 FY26 was a muted quarter for the apparel industry, marked by cautious consumer sentiment and lower footfalls.

  • FY26 revenue is projected to be 5% to 6% lower than last year.

Key financials

3 periods

Headline

  • ROCE (Dec 2025)
    13.7%
  • ROE (Dec 2025)
    11.2%
  • Cash Flow from Operations (Dec 2025)
    ₹115 Cr

Q3 FY26

  • Revenue
    ₹146.1 Cr
    YoY -6.3%
  • EBITDA
    ₹33.5 Cr
  • EBITDA Margin
    22.9%
  • PAT
    ₹7 Cr

9M FY26

  • Revenue
    ₹430 Cr
    YoY -7.5%
  • EBITDA
    ₹113 Cr
  • EBITDA Margin
    26.2%
  • PAT
    ₹32 Cr

What they filed

Q4 FY26: revenue up 5.9%, net profit up 7.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue124 186 156 153 120 −3%164 −12%146 −6%162 +6%
EBITDA33 58 48 41 31 −6%48 −17%34 −29%42 +2%
Net profit10 26 18 14 6 −40%19 −27%7 −61%15 +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

medium confidence
  • Liquidity Liquidity disclosed Cash flow from operations for December '25 stood at INR115 crores.
    Cash flow from operations for December '25 stood at INR115 crores.

Guidance & targets

Marketing

  • Ad and branding spend as % of revenue Marketing · next year · Medium confidence 8% to 10%
    The advertising and branding spend for 9 months FY '26 stood at approximately 5% of the revenue, and we intend to increase this to 8% to 10% of revenue for the next year, even if it has a short-term impact on profitability.

    — Kamal Khushlani

Profitability

  • EBITDA Margin Profitability · end of Q4 · Medium confidence ~25%
    By the end of the year, this should -- EBITDA should come to around 25%-odd by end of Q4.

    — Kamal Khushlani

  • Gross Profit Margin Profitability · going forward · Medium confidence Sustained
    However, going forward, we are confident that we'll be able to maintain our GP margins.

    — Rasik Mittal

Revenue

  • Revenue growth YoY Revenue · end of FY26 · Medium confidence -5% to -6%
    No, no, it won't further go down. But by the end of the year, we might be 5% to 6% lower than last year.

    — Kamal Khushlani

Store Count

  • Total stores Store Count · FY26 · High confidence ~431 stores (net -10)
    So for the year FY '26, we would be at minus 10, which is 431-odd stores.

    — Kamal Khushlani

  • New identity stores Store Count · end of Q4 · High confidence 20 (15 new, 5 renovated)
    End of Q4, there will be 20 new identity stores, out of which 15 will be new stores and 5 will be renovated stores.

    — Kamal Khushlani

What to watch in Q4 FY26

Ad and branding spend as % of revenue

next year (FY27)
Current ~5% (9M FY26)
Target 8% to 10%

Why it matters

This indicates the company's commitment to brand building and its potential impact on future revenue and profitability, requiring monitoring of actual spend vs. target.

The advertising and branding spend for 9 months FY '26 stood at approximately 5% of the revenue, and we intend to increase this to 8% to 10% of revenue for the next year, even if it has a short-term impact on profitability.

Risks & concerns

  • Muted apparel industry demand and cautious consumer sentiment

    high

    Q3 FY26 was a muted quarter for the apparel industry, marked by cautious consumer sentiment and lower footfalls, impacting overall sales momentum.

    Management acknowledged

  • Projected revenue decline for FY26

    high

    FY26 revenue is projected to be 5% to 6% lower than last year, reflecting the challenging market conditions.

    Management acknowledged

  • Temporary impact on gross margins due to GST reforms

    medium

    The company consciously passed on tax benefits to customers on products priced below INR2,500 and refrained from price increases on products above INR2,500, temporarily impacting GP margins.

    Management acknowledged

  • Short-term impact on profitability due to increased investments

    medium

    Increased advertising and branding spend (8-10% of revenue) and premiumization efforts are expected to impact profitability in the mid-term or short-term.

    Management acknowledged

Q&A highlights

6 direct
Rationale and expected outcomes of increasing advertisement spend to 8-10% of revenue amidst declining financials. Partial
So for the next couple of years, for sure, we are going to be spending 8% to 10%-odd of our revenue. However, these are decisions which are taken keeping in mind the longer-term growth, which I'm unable to project right now that when we'll hit the 20%, 30% numbers.

Analyst questioned the company's strategy of increasing ad spend despite current revenue decline and margin contraction, prompting management to clarify it's a long-term investment impacting short-term profitability.

Asked by Gunit Singh

Decline in GP margin and revenue despite opening premium stores and the overall business strategy. Direct
Nilesh, the GP margin has gone down because there have been changes in the GST rates and as we have explained in the presentation, in the Q3, we have not increased the MRPs to take care of the higher GST. However, we have passed on the benefit of the lower GST to the consumer.

Analyst challenged the company's strategy given declining financial metrics, leading to management explaining the specific impact of GST reforms on gross margins and reiterating the long-term vision.

Asked by Nilesh Doshi

Market momentum and expected timing of demand pick-up for the apparel industry. Direct
So we are hopeful that the demand should pick up given the reforms that the government has made. And for the last few quarters, it's been muted. We are hoping that the demand should pick up from spring/summer '26 onwards.

Analyst sought clarity on the broader market conditions and the timing of a potential recovery, which is crucial for the company's revenue outlook and strategic planning.

Asked by Ashi

Details on inventory optimization strategy and its implications for working capital. Direct
It's the business model that we follow, Ashi, where we take risk of the entire inventory. We provide it to all channel partners and whatever is left over at the end of the season, we take it back. ... However, historically, we have always managed to clear these goods at a profit.

Analyst inquired about the company's inventory management, which is a key aspect of its business model and directly impacts working capital and profitability, especially in a soft demand environment.

Asked by Ashi

Specific plans for store openings and closings for the remainder of FY26. Direct
So Ashi, currently, in 9 months, we have opened 27 new stores and closed 22 stores. That's a net addition of 5. However, in the next quarter, we shall be we shall be closing 21 stores and adding 6 new doors in the season. So for the year FY '26, we would be at minus 10, which is 431-odd stores.

Analyst sought specific details on the company's retail footprint strategy, which is a key driver of growth and reflects the ongoing MUFTI 2.0 transformation and network rationalization.

Asked by Ashi

Target number of premium/new identity stores by the end of Q4 FY26. Direct
End of Q4, there will be 20 new identity stores, out of which 15 will be new stores and 5 will be renovated stores.

Analyst asked for a specific target related to the premiumization strategy, providing a clear metric to track the progress of the MUFTI 2.0 initiative and its impact on brand positioning.

Asked by Tanmay

Plans for collaborations with online creators and industry for brand promotion. Direct
That's constant work in progress, but we are not looking at big slaps, but certainly, we are looking at content creators as collaborators with the brand.

Analyst inquired about digital marketing and brand building efforts beyond traditional advertising, highlighting the company's approach to engaging with modern consumer trends and influencer marketing.

Asked by Tanmay

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Detailed narrative

Q3 FY26 Performance and 9-Month Overview

Credo Brands reported a challenging Q3 FY26 with revenue from operations at INR146.1 crores, a 6.35% decline from INR156 crores in Q3 FY25. EBITDA for the quarter stood at INR33.5 crores, translating to an EBITDA margin of 22.9%, while PAT was INR7 crores. For the nine months ended December 31, 2025, revenue was INR430 crores, down 7.53% from INR465 crores in the prior year, with PAT at INR32 crores and a margin of 7.5%. ROCE and ROE as of December 31, 2025, were 13.7% and 11.2% respectively, with cash flow from operations at INR115 crores.

MUFTI 2.0 Transformation and Retail Footprint Strategy

The company is actively pursuing its MUFTI 2.0 transformation, focusing on premiumization of store experience and merchandise. In Q3 FY26, 12 stores under the new retail identity were opened, showing encouraging initial consumer response. Over the nine months, 27 new stores were opened and 22 underperforming stores were closed, reflecting a strategic emphasis on network quality over mere scale. For the full FY26, the company anticipates a net reduction of 10 stores, resulting in approximately 431 stores, with a target of 20 new identity stores (15 new, 5 renovated) by the end of Q4.

Increased Marketing and Branding Investments

Credo Brands plans to significantly increase its advertising and branding spend to 8% to 10% of revenue for the next year, up from approximately 5% in the first nine months of FY26. This strategic investment aims to strengthen brand equity and create awareness for the brand's new premium positioning and elevated store experience. Management acknowledges that this increased spend will have a short-term impact on profitability but views it as necessary for long-term brand health and sustainability.

Gross Margin Impact from GST Reforms

Gross margins for Q3 FY26 were temporarily impacted, standing at 56.5%, compared to 58.2% for the nine months. This was primarily due to recent GST reforms, where the company consciously passed on tax benefits to customers for products priced below INR2,500 and refrained from increasing prices on products above INR2,500. This measured approach was taken to protect volumes and consumer traction during a softer demand phase, with management expressing confidence in sustaining GP margins going forward.

Working Capital Management and Long-Term Outlook

The company demonstrated improved working capital management, with working capital days reducing to 179 days in Q3 FY26 from 217 days in H1 FY26, attributed to stronger collections and tighter credit discipline. Despite the current subdued demand and short-term profitability pressures from investments, management remains confident in MUFTI's long-term growth strategy. They anticipate a demand pick-up from Spring/Summer '26 onwards, leveraging strong brand recall, diversified channels, and a disciplined inventory model.

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