Wakefit Innovations Q1 FY27 earnings call

Wakefit Innovations Limited delivered a strong Q1 FY27, with revenue from operations increasing by 16.6% year-on-year to ₹404.9 crores. EBITDA grew by 25.2% YoY to ₹56 crores, achieving a margin of 13.9%. Profit after tax also saw a healthy increase of 19.2% YoY, reaching ₹23.3 crores. Gross profit rose by 19.4% YoY to ₹231 crore, with the gross margin improving to 57.1% from 55.8% in the prior year.

The mattress category remained the primary growth driver, contributing 65.9% of Q1 FY27 revenue and growing by 27.3% year-on-year. This growth was largely volume-driven (two-thirds) and supported by store expansion and online marketplace uptake. Furniture contributed 28% of revenue, while furnishing accounted for 6.3%. The company sees significant long-term opportunity in furniture and furnishing to offer comprehensive home solutions.

The operating environment was dynamic due to geopolitical developments, causing volatility in key raw material prices like polyol and TDI. Wakefit implemented calibrated pricing actions to protect margins, with about one-third of mattress growth attributed to price increases. The full impact of increased raw material costs is expected to reflect in H1 FY27, potentially leading to 100-120 bps gross margin compression.

Wakefit made strong progress on its physical retail footprint, adding 27 new COCO stores to reach a total of 165 stores across 100 cities by June 30th. The company aims to add 80 COCO stores in FY27. The omni-channel model is proving effective, with online channels contributing 52.7% and offline 47.3% of revenue, demonstrating seamless customer engagement across platforms. Own channels contributed 72.3% of total revenue, growing 20.5% YoY.

The company plans a capital expenditure of ₹100-120 crore for FY27. Approximately 80% of this investment will be directed towards expanding the retail footprint, particularly for the rollout of the larger Jumbo store format. The remaining 20% will be allocated to manufacturing automation and other business upgrades to enhance operational efficiency and support long-term goals. The first Jumbo store is targeted to go live by June-July 2027, with a second by August-September 2027, both in Bangalore.

The furniture segment experienced a slowdown due to specific issues like machine breakdowns, workforce shortages, and delays in promised delivery dates. Management expects furniture growth to return to mid-teens to late-teens over the next two quarters. The strategy involves focusing on existing store SSSG and leveraging upcoming Jumbo stores to provide a massive step-jump for the category, rather than adding more furniture-first stores currently.

Wakefit estimates its market share in the organized mattress market to be close to 10%. The company's long-term goal is to increase its organized market share by 4-5 percentage points over the next 3-5 years, focusing on balanced growth and profitability through omni-channel expansion. The competitive intensity in the mattress category has remained stable, with no new aggressive entrants observed recently.