Company Update : Raymond Lifestyle Ltd By Motilal Oswal Financial Services Ltd
Weaker than our muted expectations
* Raymond Lifestyle’s (RLL) consolidated revenue declined 11% YoY to INR15b (- 15% QoQ) in 4QFY25.
* Revenue was significantly impacted by continued weak consumer demand, high inflation, and operational disruptions caused by a ransomware attack.
* RLL opened 35 new stores in 4Q, taking its total retail store network to 1,688.
* Gross profit declined 20% YoY (-16% QoQ) to INR6.2b (in line) as gross margins contracted by 455bp YoY to 41.8%.
* EBITDA declined sharply to INR135m (vs. INR2.5b YoY and our est. of ~INR770m) due to operating deleverage, adverse sales mix and investments in retail store expansions.
* EBITDA margin stood at ~1% (vs. 14.6% in 4QFY24 and our est. of 5.3%).
* Depreciation and amortization increased 30% YoY, while finance costs jumped 13% YoY.
* Other income doubled YoY (2.1x of our estimate), led by subsidy benefits in the high-value shirting segment.
* Despite higher other income, the company reported a loss of INR450m (higher than our est. ~INR120m).
* As per RLL, it has once again become net debt free (vs. INR5.7b net debt in 2Q). This is likely driven by better secondary sales and thereby improved collections in 3QFY25.
Segmental performance:
* Branded Textile: Revenue at INR7.3b (5% beat) declined ~21% YoY on account of continued weakness in customer demand and ransomware attack. EBITDA declined 75% YoY to INR0.5b (26% miss) as margin contracted sharply to 7% (vs. 21.8% YoY, 300bp miss) on account of operating deleverage.
* Branded Apparel: Revenue at INR3.9b (in line) declined 4% YoY as higher store addition (35 stores) was offset by a likely decline in SSSG as market conditions remained challenging amid muted consumer demand. EBITDA came in at modest INR16m (vs. est. of INR307m) due to upfront retail investments and unfavorable channel mix.
* Garmenting: Revenue at INR2.5b (5% beat) was stable YoY amid a cautious approach by customers ahead of US tariff announcements. However, segment slipped into operating loss, with a loss of INR72m (vs. ~INR300m profit in 4QFY24), impacted by an adverse sales mix and higher manpower costs for new lines.
* High-value cotton shirting (HVCS): Revenue at INR1.85b (7% miss) declined ~11% YoY. EBITDA at INR611m was boosted by the one-time subsidy of INR530m. Adjusted for this, EBITDA at INR81m declined 61% YoY.
FY25 a challenging year
* Consol. revenue declined 5% YoY to INR61.7b, driven by weaker customer demand, especially in branded textile (-13% YoY)
* RLL opened 170 new stores (including 128 EBOs) in FY25, taking total retail store network to 1,688 stores (up 11%).
* The company opened 38 EBOs of Ethnix by Raymond in FY25, taking the total store count to 152.
* Consol. EBITDA declined sharply by 50% YoY to INR4.7b, due to operating deleverage, adverse sales mix and investments in retail network expansions.
* For FY25, RLL reported a modest PAT of INR382b (vs. INR4.8b YoY).
* Net working capital (NWC) days stood at 80 in FY25 (vs. 78 as of Mar’24 end). Impact of inventory stocking (up by 7 days to 104 days) in the retail and distribution network was offset by higher payables (up by 6 days to 78 days).
* OCF declined 46% YoY to INR5.3b, while FCF outflow stood at INR1.4b (though improvement on INR5.1b outflow as of 1HFY25).
* RLL reported net cash of INR0.9b (vs. net cash of INR0.2b at end-Mar’24).
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