Credo Brands

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.

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.

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 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^⏳.

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.