Relaxo Footwear

Relaxo Footwear reported a revenue of ₹629 crores in Q2 FY26, marking a 7.36% year-on-year decline from ₹679 crores in Q2 FY25. EBITDA for the quarter stood at ₹81 crores, maintaining a stable margin of 12.9%. Profit after tax (PAT) for Q2 FY26 was ₹36 crores, a slight decrease from ₹37 crores in Q2 FY25, but PAT margins improved by 34 basis points to 5.8%. For the first half of FY26, revenue was ₹1,283 crores, a 10.15% decline from ₹1,428 crores in H1 FY25. However, H1 FY26 EBITDA expanded by 101 basis points to 14.1%, and PAT increased by 4.9% to ₹85 crores, with margins improving by 95 basis points to 6.6%.

The moderation in Q2 revenue was primarily attributed to demand softness in the mass market segment and delayed purchases ahead of GST 2.0 implementation. The new GST framework, which reduced the tax rate on footwear priced below ₹2,500 to 5%, is expected to enhance competitiveness against the unorganized sector and improve affordability. However, the channel is currently focused on liquidating old inventory with higher MRPs, with the full impact of new pricing and primary bookings expected to be visible from December end and January onwards. Management noted that distributors are cautious due to concerns about adjusting input GST on old stock.

Despite the challenging demand environment and revenue moderation, Relaxo Footwear successfully maintained healthy profitability levels. This was achieved through a continued focus on cost control, operational efficiencies, and back-end optimization. The company's cost rationalization measures and efficiency initiatives were key drivers for the 101 basis points expansion in EBITDA margin for H1 FY26 and the stable 12.9% EBITDA margin in Q2 FY26.

The company's product portfolio consists of approximately 20% closed footwear and 80% open footwear. Over 98% of the portfolio is priced below ₹2,500, with a majority (over 90%) below ₹1,000. Brand-wise, Sparx contributes 40% of sales, Bahamas & Relaxo combined contribute 25%, and Flite accounts for 38%. The strategic focus remains on volume-led growth, expanding market share, and ensuring sustainable profitable performance through a portfolio of affordable and high-quality products. The company is also focusing on athleisure, sneakers, and launching premium PU products under Flite.

Management remains optimistic about a recovery trajectory, expecting momentum to strengthen in coming quarters, supported by festival demand and GST benefits. For Q3 FY26, the company anticipates revenue to be either at the same level as last year or a decline of 3-4%. Some growth is expected in Q4 FY26 (January to March), and FY27 is projected to be a much better growth year. However, consumer sentiment remains muted, and the company will continue to monitor market conditions closely.

The planned capital expenditure for FY26 and FY27 is estimated to be in the range of ₹100 crores to ₹150 crores annually, similar to last year's spend. This capex is primarily allocated towards operational efficiencies, warehouse modernization, building the company's Head Office, and moulds, rather than significant capacity expansion, as the company currently possesses sufficient capacity.

Relaxo is actively working on enhancing its distribution network by adding new distributors and rationalizing non-performing ones, an ongoing monthly process. The company has also implemented the Relaxo Parivaar app (RPA), which is driving significant growth in secondary sales. The RPA app's contribution to overall sales has increased from 50% last year to 60% this year, indicating a 20% growth at the secondary level.

The considerable increase in other income for the quarter is not a one-off^📎 event. It is primarily driven by a higher treasury base compared to the previous year. Additionally, a minor positive impact resulted from hedging gains due to dollar-rupee depreciation. Management expects similar levels of other income in future quarters, potentially boosted if government reduces interest rates.