Go Fashion (India) Ltd (GOCOLORS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '25 earnings conference call of Go Fashion (India) Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion, and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Saraogi, Promoter and CEO from Go Fashion (India) Limited. Thank you, and over to you, sir.
Gautam Saraogi (Go Fashion (India) Limited): Yeah, thank you. Good evening, and a warm welcome to everyone present on the call. Along with me, I have Mr. R. Mohan, our Chief Financial Officer, and SGA, our Investor Relation Advisors. I hope you all have received the investor deck by now. For those who have not, you can view them on the stock exchange and the company website. Q2 and H1 FY '25 saw us build further on the five strategic priorities we outlined at the start of the year. Even as the quarter was shaped by the late festive calendar and higher R&M costs, let me take you through where we stand on each of these priorities at the half halfway mark of the year and then speak about the quarters and the way ahead. Priority one was turning SSSG positive. Turning SSSG positive remains our single most important commitment for the year. After turning positive in Q1 at 0.6%, same-store sales growth for our EBOs in Q2 was broadly flat.
Gautam Saraogi (Go Fashion (India) Limited): festive quarter will be an important one of that journey. Priority two, migrating to larger store formats. Our transition to larger format stores continued through the quarter. During quarter two, we have opened nine new stores and closed 23 smaller format stores in catchments where we already have or are opening a larger store nearby. For H1 FY '27, this takes us us to 24 openings and 89 closures for the six months and we ended September with a grand total of 737 EBOs across 196 cities. Importantly, even with the lower store count, our total retail space increased to approximately 4.4 lakh sq ft as on 30th September 2026 compared to 4.34 lakh as on 31st March 2026. This is an addition there is an addition of roughly 14,220 sq ft during half of the year as we open larger stores and enlarge existing ones wherever additional space were available. Our average EBO size stands at about 608 sq ft. Our larger format stores continue to do well and outperform the smaller stores in the network, which reinforces our conviction in this strategy. These stores hold our full range and give customers a significantly more premium shopping experience. Our store expansion strategy will continue to remain calibrated and selective with a clear focus on hiding adding high-potential locations across Tier 1, Tier 2 and Tier 3 cities. Over the next 5 years, we aim to significantly expand our footprint with the potential to nearly double our square feet in terms of size. Priority three is to refreshing to refresh the product portfolio and the brand. We continue to refresh our product portfolio with new styles aimed at younger trend-conscious consumer and remain on track to add new products through FY '27. Our value-added non-leggings portfolio now contributes to 70% of the revenue, reflecting the steady premiumization of what Go Colors offers. On the brand fund on the brand front, our first campaign featuring Shraddha Kapoor, who came on board as a brand ambassador in July went live during the quarter and it has been very well executed and seemed some good results. It has given the brand a fresh younger and connect heading into the festive season and, together with our influencer-led initiatives, we believe it will support stronger customer acquisition in the coming quarters. Priority four is to expand our daily wear concept. We continue to scale our daily wear concept and now have 21 operational stores compared with 15 in Q1. We remain committed to our target of 25 to 30 daily stores by the end of FY '27. The unit economics continue to hold up well and the festive quarter will give us a good read on how these stores will perform in the peak season. Priority five is LFS channel recovery. LFS revenue in Q2 was impacted because of festive timing. Dispatches to our LFS partners typically take place in September ahead of the festive season has moved to October this year. This is a shift in timing rather than demand and the supply chain with a key LFS partners remains normalized. We continue to work closely with our partners on assortment, placement and sell through and LFS contributed about 23% of our sales in H1 FY '27. So while the Q2 numbers were affected by the festive timing and raw material inflation, the underlying progress on our five priorities remain on track. Coming to the financial performance. Revenue for Q2 FY '27 degrew by 3% largely on account of the festive days that I just spoke about. Gross margins for the quarter stood at 60.8%. As I mentioned on the first on the last call, fabric prices have gone up due to geopolitical situation and this higher cost inventory has started flowing in in quarter two. We intend to pass on the raw material inflation through calibrated pricing actions, which will help restore gross margin in the coming quarters. During the quarter, we recognized an exceptional expense of 3.4 crores, taking the total of for H1 FY '27 to 9.9 crores. This exceptional expenditure is right off of capital expenditure on account of store closures, which has happened through the six months. This It is a direct consequence of our network consolidation strategy and it is a one-off item. Full price sales ratio for H1 FY '27 stood at a healthy 93% and our average selling price in for EBOs is at Rs. 827. On the balance sheet side, we continue to make good progress. Working capital days stood at 134 days with inventory days improving to 94 days from 100 days at the end of Q1, now within now within the 90 to 100-day range, which we had guided earlier this year. Operating cash flow on a on a pre-Ind AS basis stood at a health
Gautam Saraogi (Go Fashion (India) Limited): 52.6 crores. Looking ahead, the festive season has started on a decent note and we will be better placed to assess the full impact once the period concludes. Our priorities for FY27 remain unchanged, sustaining trip SSG mo- momentum, accelerating our transition to larger format stores, refreshing our product range, and scaling our daily wear and initial international initiatives. We remain confident that these efforts will translate into stronger performance through the year. Our company continues to maintain a strong competitive strength as one of the most rec most recognized bottomwear brands with a clear emphasis on quality, comfort, and fit. Our deep category expertise and brand recall position us well within the women bottomwear segment. Given the still low penetration of organized players, the bottomwear category offers a meaningful long-term growth opportunity. With this, I would like to hand over the call to our CFO, Mr. R Mohan, for the update on Q2 and H1 FY27 results and financials. Thank you.
R. Mohan (Go Fashion (India) Limited): Thank you, Gautam, and good evening, everyone. I'll get now give you the financial highlights for Q2 FY27. Our revenue stood at ₹218 crores, a decline of 3% YoY. Gross profit stood at ₹132 crores with a gross margin of 60.8%. EBITDA before exceptional expenses stood at ₹56 crores, EBITDA margin before exceptional expense stood at 25.8%. PAT stood at ₹9 crores. Now, I will give you the financial highlights of half yearly, H1 FY27. Revenue stood at ₹440 crores, a decline of one 1.5% year-on-year, gross profit at ₹272 crores with a gross margin of 61.8%. EBITDA before exceptional excep- expenses stood at ₹123.4 crores with EBITDA margin of 28.0%. Cash flow from operations pre-Ind AS 116 stood at ₹52.6 crores. Our ROCE and ROE, excluding Ind AS impact, stood at 8.9% and 6.7% respectively for the half H1. Cash and cash equivalent stood at ₹211.4 crores as on 30th September, 2026. With this, we'll now open the floor for questions and answers.
Moderator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question comes from the line of Aabhaas Poddar with Aionios Alpha Investment Management. Please go ahead.
Aabhaas Poddar (Aionios Alpha Investment Management): Yeah. Hi, thanks for taking my question. So, just wanted to understand a couple of things. One, if you could just talk a bit more about the other expenses on the cost side. I understand that you explained the one-off, but I would have thought if I look at YoY numbers, we've had a net closure of 75-odd stores and these are the smaller-format stores which are giving us lesser profitability. I would have thought we would still have lower costs, but I understand you would have made certain investments, as well. So, if you could just talk a bit about that in detail just to help us understand what's exactly gone on in the last year because I would have thought the savings would have would have outgrown the expenses. That's question number one. And the question two is this is a smaller one in the gross margin, are you planning to take a price hike or or have you already taken a price hike to offset the cost increases that you're seeing? Just these two questions. Thanks.
Gautam Saraogi (Go Fashion (India) Limited): Yeah. Thanks, Aabhaas, for your question. So, I'll answer your first question. On the cost side, a lot of our costs has got rationalized, but there are some expenditure. Obviously, we've spent more because our advertising increase as well. If I take in our overall expenses, employee salaries and rent are the two major line items. So, because we have shut down many smaller stores, opened larger stores, we have seen our employee salaries stabilizing. Like I'll give you an example, in quarter two, last year quarter two, our employee salaries was about ₹45.75 crores and in quarter two this year, it was ₹46.3 crores. So, it has been and this is after increments, like usually we give increments to our staff every April. So, even after increments, we have seen that the employee cost this year versus last year has been as much has been pretty much flat and there's no growth in that cost. Rents we have seen a slight increase. This is on on account of opening larger stores and rent escalations. This is
Gautam Saraogi (Go Fashion (India) Limited): and we have obviously closed many stores so we have had savings on the rent part. But at the same time many stores continue to escalate every year. So, the rent cost as an absolute amount has increased. The rent cost last year in Q2 was about 36 crores. This year it is about 37 crores. So, it's more or less stayed flat to what it was last year's number. So, if I take the overall other expenses of the business, the major spike has come because of marketing and advertising. So, if I take H1, last year we spent about 7.85 crores on advertising and this year we have spent about 12.63 crores on advertising because we've got a brand ambassador on board. So, the increase in other expenses is largely because of the marketing and advertising expense. Now coming to acha one in the other expenses is one more line item obviously there is an exceptional expenditure where we've done store write-offs. Last year for H1 it was 1.73 crores and this year because of the store closure the one-off expenditure write-off is 9.87 crores. So, the two line items which have pushed the bottom line expenses on the higher side is one is advertising and the other is the exceptional expenditure. Now to your second question on gross margin, we have done price hike for certain articles which is recently done and we are in the midst of doing price hike for some other articles as well. So, I think the offset against the gross margin will take a couple of quarters, but I think it would stabilize in the next two quarters. So, we've done some increase now and we are going to be doing some increase post festive.
R. Mohan (Go Fashion (India) Limited): Gautam Gautam, one more thing to add is that the other expenditure is not only store write-off, it will also have store renovation. We have done for couple of stores renovation so that
Gautam Saraogi (Go Fashion (India) Limited): renovation also, yes. Yeah. So, we've also we've also taken some store renovations this year. We don't I don't have the exact number handy for what is the value of the store renovation, but that could have also spiked the amount a little bit.
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