Raymond Lifestyl

Raymond Lifestyle Limited reported a 2% year-on-year revenue increase to INR1796 crores in Q3 FY25, with EBITDA at INR221 crores and an EBITDA margin of 12.3%. This margin compression from 13.9% in Q3 FY24 was attributed to weak consumer demand, scale deleverage, upfront investments in retail expansion and advertising, and an adverse segment mix. Management highlighted persistent macroeconomic challenges, including a projected GDP growth of around 6.5%, weak consumer spending, lower capex, and elevated, sticky food inflation impacting discretionary purchases.

The Branded Textile segment saw a 6% revenue decline to INR856 crores, with its EBITDA margin falling to 18% from 21.6% in Q3 FY24, primarily due to scale deleverage. Conversely, the Branded Apparel segment grew 5% to INR458 crores, driven by new product launches and brand-building efforts, though its EBITDA margin compressed to 9.6% from 13.9% due to upfront investments in retail store expansion and advertising. The Garmenting segment's revenue increased to INR309 crores, but its EBITDA margin dropped to 7.8% from 11.3%, impacted by a product mix shift towards lower-margin entry products for new client acquisition and higher freight costs from the Red Sea crisis.

The company is pursuing a 3-5 year strategy focused on expanding its distribution network, premiumization, casualization, and strong brand building. Key growth categories include branded apparel, ethnics, and garmenting. Raymond Lifestyle also entered new adjacencies: SleepZ (launched a quarter ago) and Park Avenue Men's Innerwear (launched in late December), which are expected to provide multiplier growth. Ethnix by Raymond, launched two years ago, is on track to cross INR100 crores in revenue this year, validating its proof of concept in the evolving Indian wedding wear market.

Raymond Lifestyle Limited achieved a net debt-free position with net cash of INR61 crores as of Q3 FY25. The company also demonstrated improved working capital management, with net working capital days reducing to 89 days (INR1,553 crores) in December '24 from 97 days (INR1,692 crores) in September '24. This improvement was primarily driven by a reduction in trade receivables and effective inventory control, reflecting a continued focus on optimizing financial efficiency.

Management expressed confidence in a gradual demand recovery, with positive trends observed in textile and apparel bookings for the next year. The company anticipates returning to a clear growth trajectory in FY26 and aims for a sustainable EBITDA margin of approximately 15% once retail expansion stabilizes. This recovery is expected to be gradual, with full margin recovery projected for FY26, supported by the anticipated return of branded textile margins to 20-21% and apparel margins settling at 13-14%.

While the company's aspiration for an FY28 EBITDA target of INR2200 crores remains in the 'ballpark,' management indicated a potential delay of 12-18 months. This revision is attributed to unforeseen macroeconomic headwinds, including the urban discretionary spend pressure, which were not anticipated when the original long-term plan was formulated. The company is committed to its strategic investments in brand building and store expansion but will proceed in a calibrated manner, adapting to environmental challenges.