S D Retail — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

S D Retail delivered a mixed H1 FY26, achieving robust revenue growth and a positive PAT, driven by strong gross margin expansion and aggressive EBO expansion. However, EBITDA saw a slight decline, and the EBO payback period increased due to upfront investments and a muted consumer demand environment in H1. Management is optimistic for H2 FY26, citing a rebound in demand and continued strategic focus on EBOs and omnichannel presence.

Highlights

  • Revenue grew 9.23% YoY to INR 78.30 crores in H1 FY26, compared to INR 71.68 crores in H1 FY25.

  • Gross margin improved significantly to 55.53% in H1 FY26, up from 48.82% in H1 FY25.

  • PAT turned positive at INR 0.13 crores in H1 FY26, a significant improvement from a loss of INR 0.53 crores in H1 FY25.

  • Strong EBO expansion with 64 EBOs as of September 30, 2025, and 68 as of October 31, 2025, with a target of 36 new EBOs for FY26.

  • October saw a 24% same-store sales growth, indicating a rebound in consumer demand, with positive trends continuing in November.

Concerns

  • EBITDA declined to INR 2.18 crores in H1 FY26 from INR 2.43 crores in H1 FY25, despite revenue growth.

  • EBO payback period increased to 2.5-3 years from a previous 1.5 years, attributed to higher capex and muted H1 demand.

  • Marketplace/e-commerce revenue (excluding own website) faced challenges, dropping by INR 1 crore in H1 FY26 due to heavy discounting by other brands.

Key financials

  1. Revenue ₹78.3 Cr +9.2%YoY
  2. Gross Margin 55.5%
  3. EBITDA ₹2.18 Cr -10.3%YoY
  4. PAT ₹0.13 Cr
  5. EBO Count 64 stores
  6. EBO Revenue Contribution 25%
  7. E-commerce Revenue ₹12.72 Cr
  8. Sales Per Sq Ft ₹16,375

What they filed

Q4 FY26: revenue up 11.3%, net profit down 9.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue57 106 72 101 78 +37%118 +11%
EBITDA-2 16 2 12 2 +200%14 −12%
Net profit-3 11 -1 9 0 +100%10 −9%
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
  • Capex Capex disclosed
    • Additional leasing expense for EBOs ₹3.15 Cr
    • Maintenance of EBOs ₹0.45 Cr
    So additional leasing expense is around INR 3.15 crores and the maintenance of the EBO is around INR 45 lakhs. And commission expenses are increased by about INR 2.35 crores.

Guidance & targets

EBO Store Count

  • New EBOs to be opened EBO Store Count · FY26 · High confidence 36
    So, we have projected 36 EBOs to be opened in this financial year. We opened 13 of them in the first half... All of them will come in this financial year.

    — Hitesh Ruparelia

  • Monthly EBO openings EBO Store Count · Ongoing · High confidence 3
    Our target is to open three stores a month.

    — Hitesh Ruparelia

EBO Revenue Contribution

  • EBO contribution to total revenue EBO Revenue Contribution · Year-end FY26 · Medium confidence 20%
    So, we expect the 25% to bring down to close to 20% by the year end.

    — Hitesh Ruparelia

Profitability

  • EBITDA Margin Profitability · FY26 · Medium confidence Same as last year (11.7%)
    So, we are not expecting any increase in margin this year.

    — Ritesh Saraogi

  • EBITDA Margin Improvement Profitability · H2 FY27 · Medium confidence Differential margin gain
    In the second half of the next year, you might be able to see some marginal differences coming in.

    — Ritesh Saraogi

Revenue

  • Overall Revenue Growth Revenue · Ongoing · Medium confidence High double-digit numbers
    What we have told is that we are expecting to grow in high double-digit numbers.

    — Hitesh Ruparelia

EBO Revenue

  • Monthly EBO run rate EBO Revenue · Rest of the month (Nov/Dec) · High confidence INR 4.25-4.5 crores
    So I think you can consider anywhere between 4.25 to 4.5 will be the average for the rest of the month.

    — Hitesh Ruparelia

  • Annual EBO revenue EBO Revenue · FY26 · High confidence INR 45-50 crores
    So, does it seem like we might be able to get like INR 50 crores kind of revenue from the EBOs this year? Yes. Between 45 and 50.

    — Hitesh Ruparelia

Technology

  • CRM System Activation Technology · This quarter (Q2 FY26) · High confidence 100% active
    In this quarter, our CRM will be 100% active.

    — Hitesh Ruparelia

What to watch in Q3 FY26

EBITDA Margin Improvement

H2 FY27
Current 2.18 crores (H1 FY26), expected to remain flat for FY26
Target Differential margin gain

Why it matters

Indicates the effectiveness of current investments in driving future profitability and operational efficiency.

Currently, we are investing in building up team and other expenses to escalate the business. So, we are anticipating that next year second half is when we will start seeing the differential margin gain, because we will have a substantial chunk of stores that will be active and business will start rolling out from them.

Risks & concerns

  • Muted discretionary consumption in H1 FY26

    medium

    H1 saw muted discretionary consumption across India, impacting performance, but a rebound is expected in H2.

    Management acknowledged

  • Increased EBO payback period

    medium

    The payback period for EBOs has increased from 1.5 years to 2.5-3 years due to higher capex and initial muted demand, though expected to improve as stores mature.

    Both acknowledged

  • Marketplace discounting by competitors

    medium

    Marketplace revenue (excluding own website) dropped by INR 1 crore in H1 FY26 due to heavy discounting by other brands, but recovery is expected through omnichannel strategy.

    Management acknowledged

  • EBITDA decline despite revenue growth

    medium

    EBITDA declined in H1 FY26 due to investments in team and expenses for business escalation, with margin gain expected from H2 FY27.

    Both acknowledged

Q&A highlights

8 direct
EBO Revenue Contribution and Payback Period Direct
See, our business model is that our H2 for the other channels is fairly large. So, we expect the 25% to bring down to close to 20% by the year end. But yes, the growth of EBO has been quite significant. ... No, the payback period is going up as we open more stores, right. So, that is not constant. That was on a small footprint of stores. But otherwise, the payback is getting closer to industry standards. It's currently between 2.5 to 3.

Clarifies the expected EBO revenue mix and explains the increase in payback period due to higher capex and initial demand challenges.

Asked by Vipul Lamba

EBIT Margin Outlook and Investment Strategy Direct
Currently, we are investing in building up team and other expenses to escalate the business. So, we are anticipating that next year second half is when we will start seeing the differential margin gain, because we will have a substantial chunk of stores that will be active and business will start rolling out from them. ... So, we are not expecting any increase in margin this year.

Explains the current pressure on EBIT margins due to investments and provides a timeline for expected margin improvement.

Asked by Vipul Lamba

Current Market Conditions and H2 Outlook Direct
So probably, it looks like adversity is over. I think GST changes also pushed consumers to retail. We recorded a same-store sales growth of 24% in October. That was the highest that we have seen so far. And I think the trend in November also continues positive. ... So we are expecting that second half will be better as compared to the second half of last year.

Provides a positive assessment of the current market and strong expectations for H2 FY26 performance.

Asked by Vipul Lamba

Quality, Affordability, and Pricing Strategy Direct
So, quality comes naturally to us because we have been in business for the last 30 years and we are consistently being loved by consumers. I mean, nothing at cost of quality. ... We follow a price laddering model in our stores and in our trade also. So, if you will go to our store, you will see the garment price starting from INR1,499 and you can see up to INR 3,500.

Details the company's core brand philosophy and how it manages pricing to attract and upgrade customers.

Asked by Rushang Patel

Product Development from EBO Feedback Direct
That's one of the most significant changes that has happened in the organization because now starting from our design team to our sourcing team to our product team, they are all able to visit EBOs, understand the consumer feedback firsthand. ... So, based on that feedback, we launched, I think, almost four franchise licenses so far, and it has become a 15% additional business for us.

Highlights how direct customer feedback from EBOs is integrated into product development, leading to new business opportunities like licensed products.

Asked by Rushang Patel

E-commerce/Marketplace Channel Challenges Direct
Marketplaces, we are facing a challenge that some of the brands are discounting very heavily. ... we are hoping that this recovery will be done through Omni in the second half of the business.

Identifies competitive pressure in the e-commerce segment and outlines the strategy to mitigate it through omnichannel integration.

Asked by Ankur Aggarwal

Rationale for COCO Model Direct
The reason for going into COCO model is there are certain malls and very highlighted properties, where having a franchisee is not going to be meaningful, it requires very high intensity supervision, monitoring and decision-taking, right. So a layer of franchisee at high rental, high opportunity malls is not in the interest of company.

Explains the strategic decision behind adopting the Company-Owned, Company-Operated model for specific high-value locations.

Asked by Ankur Aggarwal

Store Performance and Productivity Improvement Direct
So, it's a very clear indication that store matures after a year's time. So, all stores which are one year aged and above, they deliver different kind of an EBITDA, much higher as compared to stores opened within last one year. There is a substantial difference. ... So, inside the store the entire game is happening inside the store. So, first and foremost is we are focusing more on visual merchandising. ... Second thing is we are investing on training our front-end people, right?

Provides insights into store maturity curves and the operational strategies employed to enhance in-store productivity and customer experience.

Asked by Dhanraj Solani

3 min read 7 chapters

Detailed narrative

H1 FY26 Financial Performance Overview

S D Retail reported a revenue of INR 78.30 crores for H1 FY26, marking a 9.23% year-on-year growth compared to INR 71.68 crores in H1 FY25. The company achieved a significant improvement in gross margin, reaching 55.53% in H1 FY26, up from 48.82% in the previous year. PAT turned positive at INR 0.13 crores, a substantial recovery from a loss of INR 0.53 crores in H1 FY25. However, EBITDA saw a slight decline to INR 2.18 crores from INR 2.43 crores in the same period last year, attributed to increased investments.

EBO Expansion and Strategic Focus

The company's Exclusive Brand Outlet (EBO) network expanded to 64 stores as of September 30, 2025, and further to 68 by October 31, 2025, from 51 at FY25 close. S D Retail aims to open a total of 36 EBOs in FY26. EBOs contributed 25% to H1 FY26 revenue, though this is expected to normalize to 20% by year-end due to H2 seasonality in other channels. The payback period for EBOs has increased to 2.5-3 years from 1.5 years, primarily due to higher capex and initial muted demand, but is expected to improve as stores mature.

Market Dynamics and H2 Outlook

H1 FY26 experienced muted discretionary consumption across India. However, management anticipates a strong rebound in consumer demand in H2, driven by the implementation of GST revisions, cooling inflation, and the early onset of winter in northern markets. This positive outlook is supported by a 24% same-store sales growth recorded in October, which was the highest seen so far, with positive trends continuing into November. The company expects H2 FY26 to outperform H2 FY25.

Product, Pricing, and Customer Feedback Integration

S D Retail maintains a strong focus on quality sleepwear, leveraging its 30-year industry experience. The company employs a price laddering model in its stores, with products ranging from INR 1,499 to INR 3,500, designed to encourage customers to explore more premium offerings. Direct customer feedback from EBOs is actively integrated into product design and sourcing, leading to innovations such as licensed products, which now contribute an additional 15% to the business.

Technology and Omnichannel Strategy

Technology remains central to the company's growth, with all core systems migrated to a cloud-native infrastructure, enabling real-time visibility and faster decision-making. Over 20 custom low-code and AI tools are utilized across various operations. The omnichannel strategy is being strengthened to deliver a seamless experience, integrating inventory, reducing delivery times, and offering personalized content across its website and marketplaces. The CRM system is expected to be 100% active this quarter, enabling data-driven consumer analysis and retargeting.

E-commerce Channel Performance and Challenges

While the company's own e-commerce website is growing, with revenue increasing from INR 1.42 crores to INR 1.92 crores, the overall marketplace revenue (excluding own website) experienced a drop of INR 1 crore in H1 FY26. This decline is attributed to heavy discounting by other brands in the marketplace. S D Retail emphasizes its position as a fashion brand rather than a commodity-led business and expects its omnichannel strategy to drive recovery in the e-commerce segment during H2.

COCO Model Adoption and Store Productivity

S D Retail is increasingly adopting the Company-Owned, Company-Operated (COCO) model, particularly for high-opportunity malls and highlighted properties. This approach is preferred where a franchisee model might not be suitable due to high rental costs, intense supervision requirements, and management bandwidth. The company is also focusing on enhancing store productivity through improved visual merchandising, efficient fulfillment processes, and extensive training for front-end staff to better communicate brand messaging and product value.

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