Wakefit Innovations Limited — Q3 FY26 earnings call

Wakefit Innovations reported a robust Q3 FY26, achieving its highest-ever quarterly revenue of INR4,213 million, representing a 9.4% year-on-year growth. This performance was driven by operating leverages, which led to a significant increase in profitability. Reported EBITDA nearly doubled to INR592 million, with a 14% margin, marking a 196% YoY increase. Operating EBITDA also saw substantial growth, reaching INR416 million with a 9.9% margin, up from 2.1% in the same quarter last year. Net Profit After Tax (PAT) for the quarter was INR319 million, translating to a 7.6% margin.

For the first nine months of fiscal year 2026, Wakefit's revenue from operations stood at INR11,453 million, demonstrating a 17.9% year-on-year growth. Reported EBITDA for this period grew by 174% to INR1,454 million, achieving a 12.7% margin. Operating EBITDA for the nine months was INR933 million, with an 8.1% margin, a significant improvement from 2.2% in 9M FY25. PAT for the nine-month period was INR674 million, at a 5.9% margin, reflecting strong overall financial health and operational efficiency.

The company's revenue mix for the first nine months of FY26 shows mattresses as the primary contributor at 61.3%. The furniture category, including beds, sofas, and wardrobes, contributed 29% of revenues and exhibited a strong 27.5% year-on-year growth. Furnishings accounted for 9.7% of total revenue. Management emphasized the significant market opportunity in furniture, which is nearly 10 times the size of the mattress market, indicating a strategic focus on expanding this segment for a more balanced business mix and market share gains.

Wakefit has established a comprehensive omnichannel strategy, with 137 active company-owned, company-operated (COCO) stores across 76 cities and nearly 1,700 Multi-Brand Outlets (MBOs) in 453 cities. Own channels (website and COCO stores) contributed 64.7% of 9-month sales. The company plans to accelerate its store expansion, targeting approximately 50% more store openings in the next fiscal year compared to the 11 net additions in Q3 FY26, aiming to tap into smaller cities and underserved pockets of India.

The significant improvement in profitability, particularly the near-doubling of EBITDA, is attributed to operating leverages, including enhanced capacity utilization at the furniture facility. Gross margin for Q3 FY26 improved by 230 basis points compared to Q3 FY25, primarily due to efficiencies in manufacturing and reduced wastage. Management clarified that future operating leverage will stem from manufacturing/supply chain optimization and central cost control, rather than advertising and promotion expenses, which are largely variable and adjusted based on performance.

Wakefit anticipates mid- to high-teen revenue growth for FY26, coupled with continued improvement in operating EBITDA margin. Same-store sales growth (SSSG) for mature stores (open over one year) consistently exceeds 20%. The mattress segment is projected to grow at mid-teen levels, while the furniture category, benefiting from a smaller base, is expected to grow at early to mid-20s. Advertising and promotion expenses are guided to be around 8-9% of sales in the medium term, aligning with historical trends and competitive intensity.

The Q3 FY26 results were achieved despite a shift in festive demand, with Diwali-related sales advancing to September 2025 (Q2 FY26) from October 2024 (Q3 FY25). Additionally, new GST reforms impacted discretionary product categories, temporarily shifting consumer spending. This led to an aberration in Q3 mattress growth, but demand has since normalized, with Q4 FY26 trends showing mid-teen growth and Republic Day sales growing mid-20s year-on-year.