Ladies and gentlemen, good day and welcome to the Go Fashion (India) Limited Q4 FY25 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as of the date of this call. These statements are not the guarantees 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 this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Gautam Saraogi from Go Fashion (India) Limited. Thank you, and over to you, sir.
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 Investor Relations Advisors. I hope you all have received the investor deck by now, and for those who haven't, you can view them on the stock exchange and the company website. At Go Fashion (India), we continue to deliver robust financial performance despite a challenging demand environment. During Q4 FY25, revenue surged by 13% YoY to INR 205 crore. EBITDA stood at INR 62 crore, a growth of 16% on a YoY basis.
Q4 FY25 witnessed a recovery in SSSG, which stood at 2.1% for Q4 FY25. This performance is in line with our efforts on improvising business efficiency and implementing store cost control measures. For FY26, our aim is to improve our SSSG and achieve positive SSSG in FY26. Over the years, we've evolved from a leggings and churidar-focused brand into a comprehensive bottom-wear brand. This transformation is reflected in the growth of our average selling price, which stood at INR 769, mainly driven by the shift in our product mix.
We have maintained a strong full-price ratio at 95.4%, highlighting both strength of our pricing strategy and continued acceptance of our products in the market. Our strategy continues to center on positioning ourselves to be the go-to destination for all women's bottom-wear needs by offering a wide range of products at accessible price points and catering to a diverse customer base. Moving to operational metrics for Q4 and FY 2025, in FY 2025, we added a net total of 62 new stores, bringing our total store count to 776.
Some of our planned store openings in Q4 FY25 were delayed and shifted to the next quarter due to stores getting prepared and some delay in that. We have already mapped out and finalized over 30 stores in Q1 FY26, ensuring that we are well-positioned for a strong start of the year. During Q4 FY25, we also focused on rationalizing our store portfolio, and all our store closures have been completed. With these closures done, we aspire to do an addition on a net basis of 120 stores annually starting FY26. During Q4 FY25, we achieved a low single-digit SSSG of 2.1%, while the broader environment remains somewhat challenging.
We are beginning to see some early signs of gradual improvement in demand at the ground level. Encouraged by the trends, we believe the momentum will continue to build, and we expect further strengthening of demand as we move forward. Our teams remain focused on delivering superior customer experience and driving operational excellence, which positions us well to capture the emerging opportunities. Our advertising and promotion spend as a percentage of revenue stood at 2% for FY25, which is in line with our previous commentary.
Coming to our working capital and cash flows, our disciplined inventory management has resulted in maintaining our inventory days at 102 days. We believe that there is room to optimize this further by a few days, which will contribute to a stronger balance sheet and support long-term sustainable growth. I'm pleased to share that we successfully achieved our target of converting 50% of our pre-Ind AS EBITDA into operating cash flows during FY25.
As we look ahead, we are confident of sustaining this performance driven by a disciplined approach towards inventory management and our strong focus on working capital efficiency. I'm also pleased to share that we are on track to open our inaugural store in the Middle East in partnership with Apparel Group, we expect our first store to open either by May or by June, marking an exciting milestone in our international expansion.
This store is going to be planned to open in Silicon Central Mall in Dubai. Now coming to new business update, our main business remains firmly rooted in women's bottomware and we continue to lead this category with a strong focus on quality and customer satisfaction. Our customer recognizes GoColors as a very core, functional, and everyday wear brand, and now we take this opportunity to extend GoColors to new categories of women's everyday wear and few categories of men's everyday wear.
These will include products like basic kurtis, shirts, dresses, and all-day, everyday casual clothing of women, as well as selected men's apparel such as polo shirts, chinos, lounge pants, and casual shirts. These products would remain functional in nature and are designed to stay in fashion for long periods of time with minimal prints and timeless styles, distinguishing them from fast fashion trends.
These new categories are being introduced as a pilot with only a carefully selected range of SKUs. We would be looking to have 15 stores of this new concept in the first six months' phase and 10 stores in the second six months' phase. Since some of our existing bottom wear stores are already about 1,500 sq ft in size, we will be using the first 15 stores of our existing network by adding these new categories in these stores, with GoColors seamlessly extending to become a one-stop destination for all everyday clothing.
The objective here is to increase the wallet share of customers who already visit for our bottom wear by offering them complementary products inside the store. We are utilizing our existing store network for these new offerings under the same brand, ensuring a seamless customer experience. While we are in the early stages of this pilot, we continue to be optimistic and bullish about the potential of our main business, which is our bottom wear business, with 120-plus new store expansion in the coming FY2026.
We look forward to evaluating the success of these offerings and opportunities that may unlock in the future. Our ongoing investments in technology and product innovation continue to keep us ahead of the industry trends. As the broader industry begins to recover, we are well-positioned to deliver strong performance in the years to come. With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for an update on Q4 and FY25 results and financials. Thank you.
Thank you, Gautam, and good evening, everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First of all, I'll give you the financial highlights for Q4 FY2025. Our revenues for the quarter stood at INR 205 as against INR 182 in Q4 FY2024, a growth of 13% YoY. Gross profit stood at INR 132, a growth of 14% YoY, with a GP margin of 64.3% for the quarter. Our EBITDA for the quarter stood at INR 62 as compared to INR 54 in Q4 FY2024, a growth of 16% YoY. Our EBITDA margin stood at 13.5%.
Profit after tax for the quarter at INR 20 and witnessed a growth of 52% YoY. PAT margin stood at 9.7%. Coming to the FY2025 performance, revenues stood at INR 848 in FY2025 as against INR 763 in FY2024, a growth of 11% YoY. Gross profit stood at INR 537 crore, a growth of 14% YoY, with a GP margin of 63.3% for the year-end at FY25. EBITDA for FY25 stood at INR 268 crore as compared to INR 242 crore for FY24, a growth of 11% YoY. Our EBITDA margin stood at 31.6%. PAT for FY25 stood at INR 93 crore as compared to INR 83 crore in FY24, a growth of 13% YoY.
Our PAT margin stood at 11%. ROCE and ROE, excluding Ind AS impact as on FY25, stood at 19.2% and 15%, respectively. Cash and cash equivalents, including mutual funds and fixed deposits, stood at INR 249 crore as on 31st March 2025. With this, now we will open the floor for the question and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 will wait for a moment while the question queue assembles. The first question is from the line of Devanshu Bansal from MK Global. Please proceed.
Hi Gautam. Congratulations on a good pickup in the LFS channel, and thanks for taking my question. Gautam, all through the weak demand environment that prevailed over the last couple of years, right? We remained focused on this women's bottom wear category. Now when we are seeing some green shoots, we are experimenting with new categories, including menswear as well. I just wanted to sort of dive deeper into the thought process behind this experiment. Do you also fear some loss of brand positioning or shopping experience for women because of this?
Yeah, thanks, Devanshu. See, I think look, the idea here to do an experiment is not to dilute the brand, obviously. We feel the brand can get very well extended to other essential categories of women and very few categories of men. See, even the experiment what we are doing, 80-85% of our product range what we are introducing are going to be in the women's space. There are some complementing products of menswear which we see can sell very well with the women's wear. The positioning here is to create an essential everyday wear type of clothing store.
I'll give you a closest example. How you have a Uniqlo internationally where a Uniqlo resembles functional fashion, round-the-year products for women and men. We are trying to create, we are trying to look to create that in the women's wear space with a very small experiment in the men's wear space. The positioning is going to be more from a perspective of how a Uniqlo is internationally, make that more like an Indian Uniqlo version to cater to the Indian customer with more everyday wear and functional clothing. Our idea is not to become a fast fashion brand.
It is going to be on the thesis of it being core, functional, high quality, and very sharp pricing. The pricing also, what we are targeting for this, is going to be between INR 800-INR 1,800.
Interesting. Gautam, you have mentioned that in the first year, I guess the plan is to add about 25 odd stores or maybe experiment this in 25 odd stores. Eventually, going beyond FY2026, what is the exact plan? Do we plan to open larger stores?
Devanshu, right now it's just a pilot. For me to give a guidance on this is very difficult. Because we are doing it as a pilot, we feel a 25-store pilot will do justice. Luckily, what happened when we were analyzing how much square feet we would require for this concept, in our current network of stores, we have about 15-20 stores which are greater than 1,500 sq ft and are close to 2,000 sq ft. The best way we felt of doing piloting was that those stores are already doing very well. Adding categories in those stores, the customer footfalls are already very strong.
In the first pilot, we are doing it in our existing network of stores which are greater than 1,500 sq ft, so we don't incur rental costs. Based on the pilot, we will strategize on how to go and take it in the future.
Understood. Last question on this, are you also sort of exiting from some of the women bottom wear categories to free up space for this? Because obviously those 1,500 to 2,000 sq ft stores.
No, no, no. Our bottom wear categories in those 15 bottom wear stores where I'm going to be adding categories, the bottom wear size will nowhere reduce. That will not get diluted.
Understood. Last question from my end. EBO SSG has definitely picked up. In some sense, it has been led by improvement in realizations, right? Almost like 2.3% gain in realization and 2.1% increase in SSG. I wanted to understand, the volume growth remains muted. What are the steps that we are taking to sort of improve the volume growth at the same stores?
See, I think look, we have seen some traction in Q4. January and February were relatively good months. Even March, the second half of March also was good because we had an early Eid. I think look, the consumer sentiment is improving. This is the first time we are seeing some decent low single-digit SSG from a positive perspective. I think in the coming quarters, as demand keeps improving, the value SSG will improve and even the volume SSG will improve. I think it is a matter of time when this is improved, even the other will improve as well.
Understood. Any initial signs in April, sir? So far, are you seeing some improvement versus whatever?
April right now, from what I see, April SSSG has been flattish. We are expecting May and June to be good, but April has been a little slow.
Understood. Thanks for taking my questions, Gautam.
Yeah, no problem.
Thank you. The next question is from the line of Gaurav Jogani from JM Financial. Please proceed.
Thank you for taking my question. Sorry, Gautam, but I missed on this new category thing that you mentioned, what are the things you will be introducing? If you can help me out with that again, sorry.
Yeah, yeah. Gautam, basically, see what we are doing is we are entering into the women's tops wear space by doing basic tops, basically basic kurtis, basic shirts, basic dresses. The prints and basically the design of the clothing is going to be more timeless. For example, it's not going to be fast fashion. Here, the prints and the styling is going to be more core and functional in nature. We are introducing some new categories which are more everyday wear for women, and we're doing some selected styles for menswear.
The idea here of positioning Go Fashion is more from the perspective of it becomes like a one-stop destination for functional everyday clothing. Like the closest example I can give you is what Uniqlo has done internationally, right? Uniqlo has done a fantastic job internationally by attracting customers and giving them very solid, core, functional products where it's not linked to fast fashion. We are also trying to benchmark them and trying to create like an Indianized Uniqlo version of everyday wear. That's the thought behind it. The idea is obviously to test it and do a pilot in 15-20 stores, like I mentioned.
If the pilot does well, then we will strategize how to take it further.
Sure, Gautam. My next question is with regards to that, the Reliance and credit note that you generally receive in Q4. How much of that has contributed for this in this quarter?
See, last year, during the same quarter, we had received a credit note of about INR 8 crore. This year, for quarter four, same quarter, we have received INR 11 crore.
Okay.
The delta difference between this quarter and that quarter would be about INR 3 crore.
This would be recognized in the LFS revenue, right?
Yeah, yeah, of course. This would be part of the revenue in that, yes. Correct.
Okay, okay. Sure. Gautam, lastly, what would be your guidance in terms of the LFS additions? Because this year, also the LFS additions have also been lower. Going ahead, what kind of LFS additions that we can see?
See, it is a little hard to say right now. See, for EBOs, we are able to predict, Gautam. I am guessing if I have to be conservative, I think about 100 additions in the coming FY2026 on a conservative basis. Because I have visibility for 100. It might be more as well. Because LFS expansion, we do not have a control on LFS expansion to a very large extent. On a conservative basis, I would say about 100 stores we should be adding in FY2026.
Sure. Gautam, just lastly, on the MBO part.
100 stores is more from a gross perspective. See, again, we do not have a control on certain shutdowns across certain partners. On a gross level, we see ourselves adding about 100 stores in LFS in FY2026.
Okay. Gautam, just lastly, on the MBO bit as well, last quarter, we did mention that we had hired someone for this position. How is the progress on this aspect as well?
Business has been doing good. In fact, we are seeing a 30% to 40% jump on a YoY basis in MBO business. Of course, the base is very small, so the jump would look very large right now. Right now, we are more in the stages of appointing distributors, making the infrastructure ready. I think we have actually tied up with some very good distributors across south and north who are actually doing for other large brands as well. I think in the coming quarters, we see good traction in MBO.
Would this lead to any sort of jump in the working capital? I mean, what would be the working capital cycle here?
No, see, working capital cycle, I do not see a big change because even though we are going to be working on credit with certain distributors, giving that credit, we are also taking a deposit from the distributor at the same time. If we net off the deposit against the receivables, I do not think it is going to be a very heavy working capital business.
Okay. Sure, Gautam.
Thank you.
Thank you very much. Before we take the next question, I would like to remind participants that you may press star and one to ask a question. The next question is from the line of Ankit Kedia from Phillip Capital. Please proceed.
Gautam, just on the new category addition in the stores, from taking it from pilot to expanding it across the stores, what will you monitor in KPI terms to consider it as a success to take it to the next level? What are the key monitorables for us and for you?
Ankit, see, right now, very difficult to say because currently we have been working in a template where we used to take an average of 400 to 500 sq ft, 30% EBITDA business with an ROI of 15 months. This is the bottom wear template, right? As far as this new concept is concerned, which will require space of more than 1,500 sq ft, it's very difficult for me to give a KPI guidance right now. Our obvious idea is to first at least generate a good amount of sales per sq ft, and the stores should be better than EBITDA breakeven. I think it is something which we will also learn over the next seven-eight months as we open those new concept stores. For right now, for me to have a KPI guidance, it's a little difficult. It is something which we will also learn as we keep opening.
Given that these stores are already functional, assuming the SSG and everything remains the same and there is no change, right, in the business throughput despite adding new categories, will you consider that as a success or no?
See, ideally, I would like to see those stores at least see, suppose, for example, I'm giving you a hypothetical example, right? Suppose a store is doing INR 1,000,000 a month, and I'm adding these new categories. I would see, okay, is it doubling my sale? If it is doubling my sale or my sale is even increasing by 50% to 60%, then I know we are heading in the right direction. Because I'll tell you what happens. When we are going to be doing this product introduction, we are also going to make mistakes, right? Because we are bottom wear specialists.
Now, when we are getting into top wear, we will also learn; we will make mistakes. I think as an initial, even if we are able to generate a 30% to 40% additional sale over our current number of that existing store, I think then we are heading in the right direction.
These stores will also have the existing inventory, right? Currently, the density of those stores is X. You will be stuffing those stores with higher inventory so that the current business remains at O.
Actually, what happened, Ankit, see, there were many stores because of location we had selected stores and the rent was in our budget. We happened to have also 1,600 sq ft stores in our booster. In those very last stores, I was only using a certain section for my inventory. I was not using the balance section. I was keeping the balance section more as a storage for as like a backend storage for staff room and all those other things where I was not using as part of showroom space. Now what I am doing is I am just expanding the space for which I am already paying the rent and keeping inventory there. My bottom wear inventory and size do not get diluted at that particular store.
Understood. Second question to this is, typically in the menswear and the womenswear, you need separate trial rooms, right? From a Capex perspective in that store, how will that look and feel change? How much more Capex needs to be done to incorporate menswear? I can understand womenswear, it can seamlessly be on the same floor. From a womenswear, menswear perspective, will that store have 10% inventory, 5%? Do you expect men to come in or women to shop for men from that inventory?
Yeah, see, I'll explain to you. I'll tell you, 80% of our new size, what we are launching, 80% to 85% would be around women's wear because that is our forte. That is our strength. Now, why do men's wear? We've seen that these products of men's wear are complementary and can sell very well. Here, by keeping that 15% inventory, that 15% or 13% inventory of men, we are also seeing that, okay, look, a lot of our women customers are accompanied by men. I think it will be a good complementary product to sell with women's wear. See, our overall vision is to make a one-stop destination as far as everyday wear is concerned.
Right now, I can't skew my inventory where I have 40% or 45% men because men is not my specialization. That's why I'm keeping myself to my specialization and having 85% women's inventory and having only about 15% to 13% as men's inventory. Now, coming from a Capex perspective, yes, we would have to undergo additional Capex, not only for men, even for the women's space because we are extending the space in the existing store, which we had blocked, right? The showroom space was less. The additional space was blocked.
When we are going to be doing the additional space, Capex, I think to the extent of INR 2,000 to 2,500 per sq ft, we will be incurring Capex of that additional space. For example, if I'm having a store which is 1,500 sq ft and currently I'm using 600 sq ft for bottom-wear, the balance 900 sq ft where the Capex is not done, I'll be incurring, say, INR 2,000 to 2,500 per sq ft for the additional 900. Understood.
From a provisioning perspective, right? Today we are 95% full-price retailer.
Definitely.
Going forward, given that there will be some fashion element and even Uniqlo does discounting of the unsold inventory. How will you take that into, do you see that change for top wear?
Sorry to interrupt, Mr. Ankit Kedia.
No, no, Madam, I'll just complete this question. This is a very important question. Please.
All right, sir. All right.
Ankit, go ahead.
Yeah. From a provisioning, from discounting perspective, the top wear is differing. Competitive intensity is very different there compared to your bottom wear, right? You are actually head-on competing with Jockey and others who also have similar functional products at a sharp price point. How do you, how does that move your gross margins and provisio
ning and discounting?
Yeah. See, from a full-price sales ratio, Ankit, your point is very well taken. Even I don't visualize that the full-price sales ratio would be more than 95%. It might be for all, but today, as of now, I don't know what will be the full-price sales ratio. Right now, based on the research what I've done, I know it is a very high full-price sales percentage category. Whether it is going to be 80%, whether it's going to be 85%, or whether it's going to be close to 90%, that is something we will know only after the pilot. Here, I'm keeping my fingers crossed because the full research what I've done, the results show that this is a very high full-price sales category. Only once we implement it, we will know it.
From a provisioning perspective and full-price sales ratio guidance perspective, once the pilot is done, I'll be able to probably answer more questions maybe in the second quarter. Now, coming to what the idea behind this, right, competing with other people like other brands like Jockey and the good brands you mentioned, right? See, the idea here is simple. Because my stores are having footfall of women, they're coming, they're buying in bottom wear, and from the consumer research I've done, those women are also seeking to buy top wear from GoColors.
For me, the store which is already having very high footfalls for bottom wear purchase, if I keep top wear as an adjacent category in that particular store, for me to sell then and there to the customer is not going to be so difficult. If I was launching a separate identity for top wear, then driving footfall in that new store is very difficult because then you're competing with others. Here, I am basically capitalizing and tapping into my existing customers who are walking in for bottom wear. I would rather put it that way. It's a much safer pilot this way rather than me creating a separate identity for this concept.
Fair point, Gautam. All the best for the extension. Thank you so much.
Thank you, Ankit.
Thank you. The next question is from the line of Shyam Sundar Sridhar from Franklin Templeton. Please proceed.
Yeah. Hi, Gautam. Good evening. Gautam, on this new category from our earlier conversations as well, typically in women's wear, the top wear product is a fashion product. How does it align with our low-fashion, everyday essential philosophy that we are trying to pilot here? Any thoughts on that?
Yeah. See, Shyam, definitely top wear is fashion, right? Going back to my earlier commentary on the top wear being fashion, the bottom being so. The top wear is fashion. I do not say no. The kind of fashion we are trying to do is more everyday fashion where the entire thing is not seasonal, is not fast fashion. For example, if I am introducing a print, it will necessarily not go out of fashion for, I say, maybe for the next 12 months or 15 months, as I speculate. It will not be as fast as three months or four months. Right now, selling those basic tops with the bottoms, I think it is a good complementary product which we feel customers will buy.
This actually started because of the consumer research we have done. A lot of consumer research when we did with our consumers, a lot of consumers said that, "Why don't you introduce basic tops? Why don't you introduce more core products in other categories?" From there only we got this idea. We are quite hopeful that this should sell well with bottom wear. See, right now, we also don't have many answers, frankly. You'll hear me repeat the same thing again and again. We are quite positive that it should sell with bottom wear.
Sure. From an organization perspective, in terms of design teams, are there any areas that we want to build upon to make this pilot more successful? How do we see that from an organization development needs?
See, from an organization perspective, Shyam, we have strengthened our product and design development team. We have a separate team within our product and design team which is working only on this. The bottom wear team still continues to be separate because at the end of the day, when we are doing this pilot, we cannot dilute our main business, which is a fast-growing business. The bottom wear team and the design team are separate, and for this pilot, it is a separate team. From a team perspective, we are very well equipped. This is from a product team.
From the other operational teams, the teams are going to be common for this and for our bottom wear. We do not see any dilution either way.
Understood. Got it. Got it. Got it. Got it. Got it. Got it. Just one other point. This LFS revenue seems to have grown very well in this quarter. You made some comment that I think I missed. Can you just repeat that? Sorry, I did not.
See, largely, the question actually what the earlier person had asked was different. Basically, what has happened is we get a credit note from Reliance, our largest LFS partner, every quarter four. We have been getting that for the last three years. The question was that last year we had got a credit note of INR 8 crore. This year we got a credit note of INR 11 crore. Obviously, this credit note gets added on to the LFS revenue for that particular quarter. That is what the question was, actually.
Okay. Okay. Okay. INR 11 crore is the credit for this quarter.
Credit note which has come in in quarter four, which was last year INR 8 crore in quarter four.
Okay. The difference is INR 3 crore. Got it. Got it. Just one last question on the network side.
The other reason, sorry, one second, Shyam. One of the reasons why the LFS growth is also large is because on a net basis, through the 12 months, we've added about 197 stores, if I'm not wrong. Because of that 197 stores, the growth also will show higher. The minute I send inventory to these 197 stores, the sale gets booked in my books as debtors.
Correct. Correct.
That is another reason why the LFS growth will show higher than EBO growth.
Understood. Got it. Got it. Got it. Understood. Gautam, just one other thing.
Sorry to interrupt.
Mr.
I'll come back directly.
No, no, Madam, please complete, Madam. Please.
Okay.
Yeah. Just one last question. On this MBO network, you did talk about appointing distributors and having a slightly different network approach. While this is very good, this is slightly a deviation from our network strategy in terms of owning a large part of the network and having LFS as a more complementary channel. How does this having distributors and having a very different MBO channel gel with our overall network strategy? Will it create any channel conflicts? That is the other part of the question.
Correct. Shyam, I'll tell you, what you're saying is absolutely right. This was my earlier belief that we have to be very channel disciplined. See, the reason why we are doing MBO selectively is because we feel it's like LFS, MBO also is a very good customer acquisition channel. What we are planning to do is we are qualitatively going to supply only to the very large key MBOs which refrain from discounting and where the discounting control will be in our hands. Only to those very cream MBO stores we are going to be supplying through distributors.
Those MBO stores house many customers who are very loyal to those particular MBO stores only. By that, we are basically exposing our brand to a much larger customer database out there who eventually will actually see themselves also shopping in the EBO after getting acquired in an MBO. Here, the idea is not to go and supply the product range to every MBO store in the city, but only give it to the cream and the quality ones.
Say like Pothys, for example, something like that.
Example, Pothys, Naidu Hall, Jayachandran, like a few names, right, who are very disciplined in their discounting but have a very strong, loyal customer base.
Got it. Got it. Thank you. Thank you, Gautam. I'll fall back with you. Thank you.
Yeah.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two questions per participant. The next question is from the line of Sameer Gupta from India Infoline. Please proceed.
Hi, and thanks for taking my question. Sir, firstly, a little deviation from other participants. Let's come back to the core business. Store addition this year, again, guidance is 120 to 150. Now, I understand there were large accelerated store closures in the last two years. Even if I adjust for a gross basis, there are around 100 store additions. Unless the overall demand environment has changed materially, what is the confidence of this 120 to 150 store additions in FY 2026?
Sameer, very rightly you asked. In fact, I should have clarified this earlier. Actually, if I look at our openings, right, we have had 104 gross openings. Our target was about 120 to 150. We have fallen about 15% to 20% short than our guidance. I think this year, some projects got delayed. Because of that reason, the 104 was a lot lower than the 120. That was one reason. Also, it being a tough year, we were a little more careful in our business development approach. I have also seen that the momentum has picked up. We have a good number of stores opening in Q1.
We have more than 30 stores which are under fit-out and should open in Q1. I think we as management are quite confident that we will open a bare minimum of 120 and maybe go even higher if the opportunity comes right. Now, as far as consolidation is concerned, I would like to really clarify on the call that we are done with all of consolidation. We do not see any more consolidation in this year, this coming financial year. Maximum what will happen in the normal course of business if we shut four or five stores, maximum that will happen. Large consolidations of the nature of what has happened last year will not happen this year at least.
This is very helpful. One last question, if I may squeeze in. Now, again, coming back to the pilot that we are talking about. This is a pretty large step in going into a category with its own complexities. Is it like an acknowledgment that we need to diversify? We are a single-format company. As this is getting more mature, 776 stores across 180 cities already, it is probably time to start incubating new categories. This is just the start here. I mean, what is the trigger here?
See, I'll tell you. Sameer, honestly, I think as management also, we fundamentally believe that it's better to experiment and do new things when your main business is growing well and doing well. Our main bottom wear business, if I keep the recent demand challenges aside, we've had good growth in our main business. We've added a good number of stores. Operational metrics are in track. The business is generating very strong operating cash flow. When the balance sheet hygiene is so good where the operating cash flow is much higher than the CapEx and we are generating free cash flow and main business also is doing well, I thought it's a good time to do experiments.
See, because if I do experiments, right, I will succeed, I will fail. Maybe if I try two things, maybe one thing will work, one thing will not work, right? By the time we reach some sort of maturity in the bottom wear business in the coming years, maybe something else new will become big. I feel looking at the financial metrics of the business and how it's doing well based on cash flow and growth, I thought it was good to do some experiments, but calculated experiments. See, what we are doing right now, it has been in the pipeline for the last one year. We have given it a lot of thought.
We have built a team that knows how to execute this. You understand, when I built a team for top wear, it was not my existing bottom wear designers or product development people I used to make top wear. I hired a separate team and expertise in my product development team. I'm doing it as a very different exercise rather than mixing it with my bottom wear exercise. It's very calculated, and I think it should succeed. Yes, when we are doing experiments, certain things will succeed, certain things will failure. I think we'll have to take it. I think the pilot should do well over the next six months to a year.
Okay. Let me flip the question a little. In the current scenario, you have 120 to 150 store additions in Go Colors, the prime format, and also the added complexity of managing a pilot. Is there enough fund, internal accruals, etc., to fund these new developments or overall developments? Or do you also foresee taking some debt from the market to fund these projects?
No, no. Actually, if you see, our balance sheet is very well funded. If you see, this year, we have generated INR 76 crore of pre-ended operating cash flow. And we have generated INR 50 crore of free cash flow. Here, the investment what I will be doing in the pilot is not going to be very high. It is going to be on the inventory part and on the Capex part. I think the operating cash flow of the business is strong enough to fund this pilot.
Typically, CapEx is the only free cash flow, right?
Sorry?
We should look at CapEx included in this operating cash flow, right? I mean, that is also a.
Yeah. The business is generating this year, the business has generated INR 50 crore of free cash flow, which is much higher than what I would be investing in this pilot. Let me put it that way. Even after doing this pilot, there would still be free cash flow.
The 20 to 30 stores extra that you would also want to open in your Go Fashion EBO, it will still be net cash, you're saying?
Yeah, yeah. It should be generating. Our cash flow is very strong. Even after considering this pilot, we should be in a position of generating a strong free cash flow.
Got it. Got it. That's helpful. Thanks, Gautam. I'll come back in the Q&A.
Just one thing to clarify here, Sameer. The 120 to 150 stores were guidance. What I'm giving you is for the prime Go Colors. In my existing stores, I'm doing the pilot of the 15 stores. It's not going to be a separate addition to the 120 to 150.
Eventually, the pilot will also become more meaningful, right? That's just.
Yeah. That I would be able to take a call only after what is the result of the pilot. If the pilot does well and we feel we want to add stores, that might be additional. Right now, we are focusing only on the pilot.
Got it. Eventually, if it is successful, let's say, you would require funds, right? I mean, that's a normal assumption to me.
I think the cash flows are strong enough, Sameer. I don't think we will have a problem.
Fair. Fair enough. Fair enough. This is okay.
I'll connect with you offline and explain to you on this, Sameer.
Sure, sure, sir. Looking forward to that. Thank you.
Thank you. Thank you so much.
Thank you. The next question is from the line of Nikhil Garg from BNP Paribas. Please proceed.
Hi, Gautam. Many congratulations and good set of numbers. Three questions from my side. I'll just ask all three, and then you can answer. One, on the working capital side, there is a good increase in paid distributors. If you can throw more light on it. Second, what is the differentiation strategy for your category expansions like menswear and all? Why would anyone come to you? Is it similar to colors, right, that you have more color options? Or what is the exact strategy which will bring customers to your store?
Third, if you can throw some light on the competition. I'd heard from the market that Aditya Birla's Elleven , which was their bottom wear store, those have, a lot of those stores have closed in northern India. If you can throw some light on the competitive intensity within the bottom wear segment.
Sure. On the first question on the working capital, the debtors have actually gone up by about six-seven days, Nikhil, which I think will stabilize in Q1 because we've added about 70-80 stores in Q4 also. Through the year, we've expanded into Shoppers Stop and Lifestyle. The debtors are slightly higher because the secondary sale is yet to fully kick in in those stores to the magnitude of the primary sale. I think this debtors will stabilize in Q1 or maximum by Q2. I don't see that from a working capital concern, a big concern. From an inventory concern perspective, we had about 102 days of inventory in last March.
Now also, we are at about 102. Usually, our inventory spikes a little bit in March because of summer season. Through the year, we see our inventory days between, we would target inventory days between 90 days and 95 days is our target. Now, coming to the second question, what you're talking about is the new concept and the new categories we are launching. See, the fundamental what we want to be known for is our comfort, quality, and pricing. One of the reasons why customers have again and again, women customers have again and again come back to Go Colors time and again is because they feel, okay, yes, it's a very high-quality product from a comfort perspective, and the pricing is sharp.
As a positioning perspective, Go Colors is known for these two things. Those two things are the things, aspects what we are going to be fundamentally extending to these new categories as well. This is the basis on which we are trying to, we have made our product. Now, hopefully, the pilot should do well, and then we'll probably learn a lot more things. The two fundamentals on the basis of which we should be standing aside from other people in the industry is probably our comfort and our pricing. On the competition part, we've seen not much competition come up recently from a bottom wear perspective.
I think a lot of competition, like you mentioned, have also consolidated. From a bottom wear competition perspective, we don't really see any standout bottom wear-only brands. Yes, as bottom wear as a category has expanded, we have seen other players in top wear also add bottom wear to their existing portfolio of top wear products. Bottom wear-only brands, we have not seen much competition in the recent times.
Got it. Got it. Thank you so much.
Thank you. The next question is from the line of Varun Singh from AlfAccurate Advisory. Please proceed, sir.
Yeah. Thank you very much. My first question is in the bottom wear segment, you called out that if the category is maturing, then it is better for us to maybe have a larger addressable market. Maybe that is the reasoning which quite explained this pouring into the menswear segment. Just wanted to understand that you think that maybe at 1,100 or 1,200 number of stores level, the category appears to be matured, meaning that maybe 8% to 10% kind of a growth possibility. If you can throw some light on that.
No, no. See, I did not say no, I cannot correct it. See, I do not say that the bottom wear category is matured. What I meant was, see, right now, the bottom wear category has a lot of potential. Maybe in the coming years, eventually, it will mature. My perspective of saying was that before it matures and tapers off, probably it's a good time to do some experiments. Right now, from a bottom wear perspective, we stay very committed to that business because that is the bread and butter of our business. We see strong potential of growth in the coming years.
I don't think the bottom wear business has reached any maturity stage. What I was trying to give an example was that before the bottom wear business reaches maturity in the coming years, it's better to do a few experiments when your main business is growing well. That is what I meant to say.
Sure. Understood. Secondly, on the Uniqlo benchmarking that you alluded to, just wanted to get that understanding right, given that Uniqlo is 10,000 sq ft box-sized retail. You highlighted about 1,500 sq ft allocating, carving out 30% of space for the menswear segment. Maybe the pilot of 15-20 store incremental scale-up, etc. How will the template be similar? What you are doing in the bottom-wear with regards to channel strategy, that we will be selling our product through MBO, LFS, etc., because Uniqlo is not doing so.
In that context, what do you think would be the true blue blood differentiating factor with us? I think Uniqlo, H&M, and other people, they compete very strongly on design and all those things. We are saying that we want to stick to maybe essentials and not too much of fashion-fashion because I don't know how you want to strategize a full-fledged sale. Is that similar to bottom wear or not? If you can throw some light, yeah.
Yeah. See, from a size perspective, look, we are not looking to do 10,000 and all. That's very large. I think we should be able to achieve what we want out of 2,000 to 3,000 sq ft. I think 3,000 also will be a fit. I think our idea first is only to do between 1,500 and 2,000 sq ft. See, at Go Fashion, we've always created a template where we take small spaces and show productivity. We are also approaching this new concept on the basis of the same template, saying that, look, take small sizes and get higher sales per sq ft with higher replenishment cycles.
I think we should be able to achieve what we want in this range of 1,500 or 2,000 or 2,200 sq ft. From a sizing perspective, I think this is our first step. As we do this, we keep learning. We will make some mistakes also. We'll keep learning and correcting those. At a gross level, if I see, I see ourselves in this range of between 1,500 and 2,000 sq ft as far as the new concept is concerned. See, menswear, again, look, it's a very small space which I'm allotting for menswear. 85% or maybe more inventory is going to be women's wear, which is my forte.
Yes, we brought in a very different flavor by adding that 14 to 15% of menswear as a pilot. We'll have to see how it goes. Since we are a strong women's brand, we have kept that product focus also on more women's wear by having it at 85%.
Name of the store would be Go Color only? Even in this store which.
The branding, everything will be Go Colors.
Similar to bottom-wear, we will be selling menswear through EBO and large format stores?
No, no. No, no. This right now, this new concept, whatever I thought, it is going to be very, very limited to our own 15 stores, what I was talking about, and maybe the website eventually.
Similarly, like 95% would be the full price sale, or we are expecting it to be so similar to the bottom wear?
That we don't know yet. We know it's a high full price sales category ratio, but that is something we will know only after the pilot.
Because we will be dealing with essentials in terms of product assortment.
Here, I speculate, and I'm confident that it's going to be a high full price sales ratio category. I don't know the number yet. I will know only after the pilot.
All right. Sure. Thank you very much.
The idea here is to do only to those 15 stores and maybe the website in the maybe after a few months.
Understood. Sure. Thank you very much, and wish you all the best.
Thank you. Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Akhil Parekh from B&K Securities. Please proceed.
Yeah. Thanks for the opportunity. Congratulations, Gautam, to you and your team for your resilient performance and tough sales case. My first question is on the marketing activities, right, given that we are spreading now into menswear functional wear as well. I understand it's only limited to pilot stores, but I believe that there is a certain kind of consumer association of Go Colors brand with the women wear. What kind of marketing activities are you planning to increase the awareness about menswear, and will our marketing spends meaningfully go up, say, in the next 6 to 12 months as a percentage? That's my first question.
Yeah. Akhil, see, I think, look, from a marketing EMP spend perspective, I do not really see the percentage increasing. I think we will be at 2%. I think through the 2%, we will be able to do justice for our bottom wear and for the new pilot as well. I do not see our EMP increasing in any way. As far as Go Colors being a women's brand and whether men's will buy or not, I visualize that it should not be a problem. I think through the pilot, we will get a better understanding. For me, I am having my fingers crossed that it should not be an issue.
Whatever little bit of market research I have done, I have studied other international brands also who were women-only and then turned men and women, looking at those case studies as well. I've done a very deep understanding of those case studies. I have a strong feeling that men's should be able to buy. Again, we will look after the pilot, so.
From an awareness perspective, is the activity going to end up?
Right now, the awareness is going to be more limiting to the women-only on the store. We will obviously try pulling in support from women and men. The focus of getting customers will be more women-oriented.
Okay. Last question is, you have seen very few brands who are actually considered across both MBO and Uniqlo channel. I would appreciate if you have a very strong brand recall value. Many are also saying that they're going to focus more on the MBO channel. What's your thought? Usually, we are seeing brand dilution. When a brand.
No, no. This is a good question, Akhil. This is something which we debated internally also. See, I'll tell you what. Our idea is not to make MBO a very large channel, honestly. EBO is going to be the bread and butter of the business, which is going to grow the fastest, followed by LFS. See, MBO, again, is a channel strategy like how we had adopted the LFS. It's a marketing channel for us. Not marketing, but more of a customer acquisition channel for us. We will give our product only to those MBOs or key accounts where brand dilution will not happen. It is going to be done in a very selective and qualitative manner.
My idea here for gaining market share is not just to go and supply to every MBO in the industry. I don't want to do that. I want to give it only to the ones that matter so the brand also does not get diluted and we acquire customers as well. From a channel split perspective, EBO is today 72-75% of the business. It is just going to go stronger from here. It is not that we are moving our channel strategy towards MBO. That is not the case.
Okay. Okay. That was helpful. Best luck to our coming projects.
Thank you. Thank you so much.
Thank you. The next question is from the line of Rajiv Bharti from Nuvama. Please proceed, sir.
Hi, Gautam. Thanks for the opportunity. This is regarding your comparison with Uniqlo. Now, our legacy format itself has an inventory turn on, let's say, on COGS of close to 1.3, 1.4, versus, let's say, Uniqlo doing three times. Now, incremental expansion on, let's say, other categories. Do you intend to carry lower inventory and address this part somehow so that the inventory turn number basically on COGS rises, particularly because the optional trade increases incrementally?
See, what you're saying is right, Rajiv. The inventory turns in this newer category should be higher. We have also been very careful with how much inventory we are buying for these newer categories. The idea would be to have more turns than what the bottom wear business is doing because the bottom wear business's supply chain is a very different type of supply chain. The inventory turns in this should be much higher. Again, it is all depending on how the response is. Our planning is on the basis of doing much more turns than the bottom wear business.
Continuing on the core business, the geographical split, I mean, the general sense is you are probably not in these two things slightly better. Your expansion, at least for the last year or so, both, I think, in LFS and, if I'm not wrong, in EBO also, has been less on the north and still slightly skewed on the south. Are you trying to address that?
No, no, no. It's not like that. It's just based on what is good real estate available. See, I mean, look, we have been expanding everywhere. Whatever is relevant, what fits our requirements. Maybe it just so happened that we got more stores in the north. I don't think we are trying to concentrate more on north and east. We are having equal importance given as far as southwest, northeast is concerned. Yes, the one thing what we are definitely trying to do, irrespective of the zone, we are trying to also add more stores in more newer cities so that basically we are growing horizontally and not vertically.
I mean, look, we have always been a cluster-based expansion model. To drive some balance, we are also trying to add more stores in newer cities so that we are able to acquire newer customers also in new towns. That is irrespective whether it is southwest, northeast.
Yeah. Is it possible to call out what is the, let's say, south SSG on the EBO side? Versus maybe 2% for the entire portfolio?
I think the south SSG also has been positive. It's, I think, around 1%. I'll come back to you on that number, Rajiv. I don't have it handy, but I think it's around 1%.
Okay. Thanks, Rajiv.
One thing I know, the north SSG is high. North SSG is around 5-6%. West SSG also is slightly higher. I'll come back to you with that data.
Perfect. Thanks. Thanks.
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please proceed.
Hello. Thank you for taking my question. Hi, sir. Just wanted to understand this new, there have been a lot of questions around. What I'm just trying to understand is the core product that you are talking about. Because if we look at Uniqlo, which is your benchmark, there, see, they can go ahead with, because it's totally western wear category, it can go ahead with similar products, no problem. When we come to Indian categories, fashion is actually a big component in the top wear category. How are you going to look at the mix in western versus Indian wear? How do you define core over there? I'm just trying to understand that.
See, yeah, I know. See, it will be a little hard for me to explain it because the product obviously has not hit the shelf. I think once probably the store opens and you get to see it, you'll understand it a little better. I think it's going to be a good mix. It's going to be largely western with a little bit of fusion touch as well. I think it's going to be more of western, a little of Indian, a little of western and fusion. The kind of way we are going to be playing with the colors and prints, it's not necessary that those prints will not run for more than two years or more than one year. It should proceed to the next season as well.
That's how we develop the product. Look, I'll be in a better place to explain the product to you once it actually hits the shelf.
Yeah, I understand. I was just worried on the fashion content because in the top wear, especially Indian wear, the fashion wear component is much higher.
See, one thing, Prerna, we are very clear. We are going to stay away from occasion wear. Our product line is not going to be occasion wear. It's going to be under basic everyday wear. See, because we don't want to be occasion wear brand. That is not who we are.
Okay. Is menswear also usually a larger T-shirt track band category, or will it get into formals as well?
No, no, not formals. More T-shirts, loungewear type of categories. Polos, TK polos, round neck T-shirts, like those type of categories.
Okay. Okay. Understood. My second question is on the inventory. Do you see any risk to inventory in this format coming in, whether you'll be able to maintain inventory at current levels, or we should see a sharp, we should see some increase, not sharp, some increase in inventory levels with new categories coming in?
Yeah. See, I'll tell you what. I am not taking a very big inventory risk here. See, today, because of my volume of business, what I have in my main business, I've also been able to optimize on what I'm buying for this new category. Even if this new category is slow to begin with, which, fingers crossed, obviously, we should do well, but even worst-case scenario, if it is slow to begin with, I don't see my company inventory days going very high. That, I think, will be very much in control because I know inventory is a killer in this business, in retail business.
We are very careful with how much we are buying. Even in a scenario where sales are slow for this pilot and the pilot maybe is a little slow to begin with, our inventory days will not spike so much. That is just our operating cash flow.
Actually, I'm not worried on pilot at all. I mean, it's about the long-term goal on the inventory that could change with new categories coming in.
See, on the midterm and long-term, Prerna, very difficult for me to comment because we have not started yet. Maybe if a year goes by, then I will understand what kind of turns I'm doing in the newer pilot. I'll be able to give a guidance on that. As far as the core bottom wear business is concerned, I think 90 to 95 days is a business model which we have cracked very well, which we will also further optimize in the years to come.
Okay. Understood. In terms of profitability, any guidance on how the profitability can be seen as for the next one year?
See, we will look to maintain margins. Without being specific on EBITDA percentages or PAT percentages, we will look to maintain margins at a P&L level. From a gross margin perspective, I see our gross margins in maybe in the range of 62% to 63% or maybe a little higher. I think maintaining gross margins and maintaining P&L margins will be our endeavor in FY2026.
Understood. If it is a guidance, in case you are opening more larger stores given this pilot coming in, whether this year we will see larger stores coming in, what will be the CapEx spend for the year?
See, I think I can tell you on a per square feet basis because I do not know how many stores I am going to be opening on this pilot because see, the catch here is my first pilot is also my existing store network. So the CapEx is not going to be very high. If I take on a per square feet basis, it will be about INR 2,000 to INR 2,500 per sq ft.
there any increase in warehousing or the refurbishment requirements that could add up to this?
See, that's Prerna. We have been doing in our existing warehouse for some time now. See, we had a 1 lakh sq ft warehouse in Perundurai. There was some space behind which we extended. That we had extended regardless of this pilot or not. Our current location is well equipped to handle any future growth.
Okay. Understood. Thank you and all the best.
Thank you, Prerna.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference to the management for closing comments. Over to you, sir.
I'd like to thank everyone for being part of this call. I hope we've answered your questions. If you need any more information, please feel free to contact Mr. Devanshu Bansal from SJR Investor Relations Advisors, our investor relations advisor. Thank you.
On behalf of Go Fashion (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.