Baazar Style Retail Limited

Baazar Style Retail Limited delivered a robust performance in Q2 FY26, with operational revenue growing 71% year-on-year to INR 532 crores. EBITDA saw an even stronger increase of 184% year-on-year, reaching INR 69 crores, reflecting improved operational efficiency and cost management. Gross profit for the quarter increased to INR 162 crores, a 76% year-on-year rise, with gross margin expanding by nearly 90 basis points to 31%.

The company revised its top-line growth guidance for FY26 from 25% to 30%, demonstrating confidence in its performance. It remains on track to meet its target of opening 40-50 new stores this fiscal year, having already added 36 net stores in the first half, bringing the total store count to 250, a 36% increase year-on-year. The total retail area now stands at 2.3 million square feet, up 38% from last year.

Baazar Style is investing INR 20-25 crores this year in building an integrated technology backbone. Key initiatives include the implementation of SAP for ERP (expected to go live in the next six months), Infor for warehouse management (live by January 1st), and Domo for business intelligence and analytics (live by December 1st week). These investments aim to streamline processes, enhance supply chain visibility, and optimize inventory turnaround.

Sales per square foot saw a strong 22% uptick to 865 in Q2 FY26. Inventory days significantly declined from 108 days in Q2 FY25 to 86 days in Q2 FY26, indicating improved working capital management. Private label sales were a major growth driver, increasing 119% year-on-year in Q2 FY26 and contributing 58% to overall sales, with an aspiration to reach 65% by FY27.

A strategic reassessment of lease terms under IndAS 116 resulted in a one-time^📎 exceptional gain^📎 of INR 55 crores, which will help reduce the gap between pre-IndAS and IndAS profitability. Management clarified that IndAS PAT margin without this exceptional gain^📎 is expected to be 2-3%, while pre-IndAS PAT margin is guided at 3-4% for FY26 and 4-5% for FY27.

The company's strong concentration in Bengal and Assam leads to quarterly gross margin variations, particularly influenced by festival timings like Durga Puja. While Q3 is typically the strongest quarter, the preponement of Durga Puja to September boosted Q2 FY26 results. Management expects these variations to normalize as the company expands into other focus markets like UP, Bihar, and Jharkhand, though this balance is anticipated by FY27 or end of FY28.

Following recent GST rate changes, Baazar Style is passing on the entire 6.25% benefit to consumers for all products with an MRP above INR 1,000. This strategy aims to ensure fair pricing and leverage increased consumer disposable income, even though the impact on the supply chain from fabric-level GST changes is not yet significant.