Detailed Narrative
Q4 FY26 Performance Overview
Relaxo Footwears reported a strong Q4 FY26 with revenue from operations growing 8.1% YoY to INR751 crores, driven by robust volume growth and recovery in general trade. EBITDA increased by 10.6% YoY to INR124 crores, leading to a 40 bps margin expansion to 16.5% compared to Q4 FY25. Profit after tax saw a significant 20.4% YoY growth, reaching INR68 crores, with PAT margin at 9.0%.
FY26 Annual Performance and Margin Improvement
For the full financial year 2026, revenue from operations stood at INR2,702 crores. The company achieved an EBITDA of INR374 crores, with an EBITDA margin of 13.8%. PAT for FY26 was INR179 crores, marking a 5.3% YoY increase from FY25's INR170 crores, and the PAT margin improved to 6.6% from 6.1% in the previous year, reflecting sustained focus on profitable growth.
Input Cost Inflation and Price Hikes
The company faced significant input cost inflation, including material costs and labor costs, with labor increasing 25-30% in Haryana and 10-15% in other states. To offset these, Relaxo implemented calibrated price increases, resulting in a blended 15-18% hike at the consumer level. Management believes these price increases will largely remain due to sustained raw material costs, despite some recent settling of prices.
Strategic Focus on Premiumization and Product Mix
Relaxo is actively widening its premium product portfolio through sneakers and lifestyle-led products, with plans to introduce products up to INR2,800 MRP in Sparx. The company also aims to improve the contribution from women and kids categories, which currently stand at 25% and 5% respectively, from the current men's dominant 70%. This strategy is expected to drive Average Selling Price (ASP) growth annually.
Distribution Expansion and E-commerce Growth
The company plans to open 100 new Exclusive Brand Outlets (EBOs) in FY27, with 30-40% expected in the first half and most by December. These new EBOs will involve an investment of INR30-35 lakhs per store, totaling INR30-35 crores. Relaxo is also focusing on growth through e-commerce platforms, including quick commerce channels like Blinkit and Zepto, and expanding its reach to 70,000 retailers/MBO outlets and 37 export countries.
FY27 Outlook and Volume Growth Targets
While acknowledging the uncertain external environment and geopolitical situation, management is constructively optimistic about FY27. The company aims for a volume growth of 4-5% over the next two years and targets an operating margin improvement of at least 1% over FY26's 13.8%. Ad expenditure is expected to remain consistent at 4-5% of net sales, with a shift towards digital channels.
Capex Plans for FY27
Relaxo plans a capital expenditure of INR180-200 crores for FY27, up from INR130 crores in FY26. This capex will primarily be allocated to molds, an administrative office, wear and tear, machine changes, and the new EBO expansion. Management clarified that this capex is not for significant capacity expansion but rather for strategic investments and maintenance.