IGI Logo

Go Fashion’s 4QFY23 performance was operationally ahead of expectation. Revenue growth was inline with our estimate with impressive revenue construct – SSSG of growth of 17% (+ ve volume growth of 5% vs decline in 3Q) and tad better sales per store growth for both EBO & LFS channel. On the profitability front, even adjusting for reversal of discounts, gross margin surprised positively – function of better channel mix and likely benefit of moderation in input costs. Further, EBO store addition remains on track and management commentary remains sanguine in terms of growth plans, recovery in demand trend on mom basis and medium term SSSG (maintained guidance of 10% with volume growth of 4-5%). Further, management indicated that it plans to repay pledge by end of FY24. In our recent note (link), we had highlighted that Go Fashion’s intrinsic strengths (in-place execution template, lack of formidable competition and the company’s focus on newer growth drivers (online channel/new product extensions)) remain intact which provides assurance on the future runway for growth. Maintain BUY.

* Strong SSSG of 17% and steady store addition drives revenue growth: Go Fashion’s 4QFY23 sales grew by 35.6% to INR1.58bn, reported EBITDA and net profit grew by 26.1% and 20.1% to INR497mn and INR148mn respectively. Net sales were inline with our estimate while better than expected gross margins resulted in 5% beat on EBITDA vs our forecast. We reckon that net sales had positive benefit of INR 60-70mn due to discount reversals while other expenses had negative impact of INR 48mn due to writeoffs pertaining to Future lifestyle. EBO sales grew by 38% yoy led by strong SSSG of 17% (volume growth of 5%) and 25% growth in store count (added 26 stores taking total store count to 630 stores in FY23). ASP for FY23 stood at INR 727 (vs INR 724 in 9MFY23), implying better realisation in Q4FY23 aided by value added products & pricing. In terms of SSSG outlook, management reiterated its guidance of 10% SSSG led by equal contribution from volumes and better mix for FY24E. Sales per store for EBO channel grew by 9.1% yoy to INR 1.9mn, tad better than our expectation. LFS sales grew by 61% yoy (door additions +19% yoy while sales/store +30% yoy) and online channel sales grew by 56% yoy. MBO channel sales declined by 80% as operational issues resulted in lower dispatches & same has now normalised.

* Gross margin performance surprises positively, resulting in EBITDA beat despite much higher overhead costs: Gross margins (incl sub-contracting charges) - up 199bps yoy and 483bps qoq to 63.8% (vs our estimate of 58.5%). The quarter had additional revenue to the tune of INR 60-70mn due to discount reversal, pertaining to key LFS account (Reliance) which led to c.160bps kicker to gross margins. Adjusting for the same, gross margins were still up >c.300bps qoq, which is a positive surprise, given that 4Q margins are seasonally lower than 3Q – management cited likely benefit of input cost moderation, although more concrete data on the same will be available in coming quarters. Overhead costs grew at higher pace compared to sales (staff & other expenses were up 39%/87% yoy) led by higher store additions & Future lifestyle related write-off in the quarter.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361

Above views are of the author and not of the website kindly read disclaimer