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We maintain BUY on Go Fashion (GO), while revising down our TP by ~5% to Rs900 (25x Jun-27 EBITDA). While GO missed our EBITDA estimate by ~10% in Q1, our positive stance is led by certain one-offs in Q1, planned new launches, pledge reduction (by 20%), and pick-up in store additions. The Q1 EBITDA miss was largely due to 13% de-growth in the LFS channel, where though GO expects sustainable growth trends to return in remaining FY26. SSG trends remained muted (SSG down 2% in Q1), although GO assured a pick-up in store additions as well as SSG on the back of 6-7 product launches just ahead of the CY25 festive season. After a big round of store optimization (pruned ~6% of the network in FY25), store adds picked up – 27 additions in Q1 and 120-130 planned for FY26. GO’s new pilot for core/functional products in the women’s top-wear/men’s t-shirts categories is also expected to be launched in 10 of its large stores (size: 1,500-2,000sqft) in Aug-25. We maintain a conservative stance for now and will keenly watch this space. Valuations at 35x FY27E EPS are reasonable and growth rebound offers re-rating potential.

LFS channel drives the revenue/margin miss

Q1 revenue was flat, owing to 45% growth in the online/MBO channels (7% mix), while the EBO channel (71% mix) grew 3% and LFS (22% mix) saw de-growth of 13%. The sharp de-growth in the LFS channel was on account of lower footfall, supply-chain delays from Bangladesh, and consolidation within an LFS partner. Overall, EBO growth of 3% was driven by a premiumization-led 4% increase in ASP. Gross margin inched up, by ~120bps to ~63% (vs ~61.8%), led by easing RM prices and favourable product mix (value-added products); the management maintained its gross margin guidance of 62.0- 63.5% for FY26. However, EBITDA margin at 30.8% was down by 200bps, due to annual salary hikes and new hires, with store openings in the LFS/EBO channels. Number of WC days were stable at 133 (vs 134 days at FY25-end). Net store addition was 27 in Q1, with the total store-count now at 803 (1 international store); GO expects no material store closures in FY26 and is likely to add 120-130 stores on net in FY26.

Growth to improve with new launches

SSG fell 2% YoY, hit by a weaker footfall in April/May, on preponement of Eid, geopolitical disturbances, and a prolonged slowdown in discretionary spending. Encouragingly, GO assured pick-up in the EBO/LFS channels, with new store adds and SSG pick-up, helped by 6-7 product launches just ahead of the CY25 festive season. GO expects such launches in the pants and trousers category, priced at Rs1,000-1,200. The launches aim at driving volume and value, thus reinforcing its shift toward premium bottom-wear offerings. Supply chain challenges arose during the quarter due to the GoI's restriction on crossborder road transport from Bangladesh—previously a key sourcing hub for some SKUs. This led to delays in product availability, especially for styles that typically perform well in Q1 leading to a minor impact on revenue. To mitigate future risks, certain SKUs have already been shifted to Indian vendors, significantly reducing exposure to Bangladesh.

Earnings call KTAs

• Store expansion continues at a steady pace, with 27 EBO additions in the quarter, taking the total count to 803. The company retained its full-year guidance of 120-130 net additions, with about 60-70% expected in new tier 2/3 markets. The average new EBO will remain within the 400–500sqft range. Of the four store closures, two were due to store-related issues, one resulted from a mall closure, and the fourth occurred because the airport underwent renovations, necessitating the store's shutdown.
• Go Fashion continues to scale up its MBO channel gradually, with strong traction on a low base. The company views MBOs primarily as a strategic customer acquisition (like the LFS channel), rather than a core revenue driver. Focus remains on partnering selectively with large, high-traffic MBOs, which can help it source future EBO customers. GO is not planning an aggressive scale-up of this channel, as focus remains on keeping its WC stable.
• Number of inventory days stood at 98, slightly above the internal target of ~90 days. The rise was due to late ‘inward-ing’ of select styles from Bangladesh as well as pre-build inventory for the new pilot formats.
• GO believes that it has not observed any major erosion in market share, despite muted volumes. A third-party study by Technopak is under way, and GO will provide updated insights in the next quarter. While direct competition remains limited, GO did acknowledge rise in such competition in the form of emerging apparel players who also have a significant offering in bottom-wear.

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