Ladies and gentlemen, good day and welcome to Q2 and H1 FY 2027 earning conference call of Go Fashion (India) Limited. This conference call may contain forward-looking statement about the company, which are based on the beliefs, opinion, and expectation of the company as on date of this call. These statement are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask question after the presentation conclude. 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.
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 2027 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 RM costs, let me take you through where we stand on each of these priorities at the halfway mark of the year, and then speak about the quarters and the way ahead. Priority one was turning SSG positive. Turning SSG 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. This needs to be seen in the context of the late festive calendar. With the festive season starting later this year, a part of the pre-demand festival that falls in September last year has moved to October. As we said last quarter, one quarter does not make a trend in either direction. Our focus remains on delivering positive SSG for FY 2027 as a whole, and the 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 2027, this takes 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 a lower store count, our total retail space increased to approximately 4.4 lakh square feet as of 30th September 2026, compared to 4.34 lakh as of 31st March 2026. There is an addition of roughly 14,220 sq f t during half of the year, as we opened larger stores and enlarged existing ones wherever additional space were available. Our average EBO size stands at above 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 adding high-potential locations across tier 1, tier 2, and tier 3 cities. Over the next five years, we aim to significantly expand our footprint, with the potential to nearly double our square feet in terminal size. Priority three is 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 2027. 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 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 seen 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 2027. 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 our 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 the 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 2027. 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 2027 degrew by 3%, largely on account of the festive dates that I just spoke about. Gross margins for the quarter stood at 60.8%. As I mentioned on the last call, fabric prices have gone up due to geopolitical situation, and this higher cost inventory has started flowing in quarter two.
We intend to pass on the raw material inflation through calibrated pricing actions, which will help restore gross margins in the coming quarters. During the quarter, we recognized an exceptional expense of INR 3.4 crores, taking the total of FY 2027 to INR 9.9 crores. This exceptional expenditure is write-off of capital expenditure on account of store closures, which has happened through the six months. It is a direct consequence of our network consolidation strategy, and it is a one-off item. Full price sales ratio for H1 FY 2027 stood at a healthy 93%, and our average selling price for EBOs is at INR 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 the 90 to 100-day range, which we had guided earlier this year.
Operating cash flow on a pre-IND AS basis stood at a healthy INR 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 FY 2027 remain unchanged, sustaining SSSG momentum, accelerating our transition to larger format stores, refreshing our product range, and scaling our daily wear and international initiatives. We remain confident that these efforts will translate into stronger performance through the year. The company continues to maintain a strong competitive strength as one of the most recognized bottom wear brands, with a clear emphasis on quality, comfort, and fit. Our deep category expertise and brand recall position us well within the women's bottom wear segment. Given the still low penetration of organized players, the bottom wear 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 FY 2027 results and financials. Thank you.
Thank you, Gautam, and good evening, everyone. I will now give you the financial highlights for Q2 FY 2027. Our revenue stood at INR 218 crores, a decline of 3% YoY. Gross profits stood at INR 132 crores, with a gross margin of 60.8%. EBITDA before exceptional expenses stood at INR 56 crores. EBITDA margin before exceptional expense stood at 25.8%. PAT stood at INR 9 crores. Now I will give you the financial highlights of half-yearly H1 FY 2027. Revenue stood at INR 440 crores, a decline of 1.5% year-on-year. Gross profit at INR 272 crores, with a gross margin of 61.8%. EBITDA before exceptional expenses stood at INR 123.4 crores, with EBITDA margin of 28.0%. Cash flow from operations pre-IND AS 116 stood at INR 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 equivalents stood at INR 211.4 crores as on 30th September 2026.
With this, we will now open the floor for question and answers.
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 will wait for a moment while the question queue assembles. First question comes from the line of Aabhash Poddar with Aionios Alpha Investment Management. Please go ahead.
Yeah. Hi. Thanks for taking my question. 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 year-over-year numbers, we have 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 is exactly gone on in the last year. Because I would have thought the savings would have outgrown the expenses. That is question number one. And question two is just a smaller one.
In the gross margin, are you planning to take a price hike, or have you already taken a price hike to offset the cost increases that you are seeing? Just these two questions, sir.
Yeah. Thank you, Aabhash, for your question. I will answer your first question. On the cost side, a lot of our costs have got rationalized, but there are some expenditure, obviously, we have spent more because of our advertising increase as well. If I take in our overall expenses, employee salaries and rent are the two major line items. Because we have shut down many smaller stores, opened larger stores, we have seen our employee salaries stabilizing. I will give you an example. In quarter 2, last year, quarter 2, our employee salaries was about INR 45.75 crores. And in quarter 2 this year, it was INR 46.3 crores. And this is after increment. Usually we give increments to our staff every April.
Even after increments, we have seen that the employee cost this year versus last year has been pretty much flat, and there is no growth in that cost. Rents, we have seen a slight increase. This is on account of opening larger stores and rent escalations. This is 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 INR 36 crores. This year, it is about INR 37 crores. So it is more or less stayed flat to what it was last year's number. If I take the overall other expenses of the business, the major spike has come because of marketing and advertising.
If I take H1, last year we spent about INR 7.85 crores on advertising, and this year we have spent about INR 12.63 crores on advertising because we have got a brand ambassador on board. So the increase in other expenses is largely because of the marketing and advertising expense. Now, coming to Achcha, in the other expenses, there is one more line item. Obviously, there is an exceptional expenditure where we have done store write-offs. Last year for H1, it was INR 1.73 crores, and this year, because of the store closure, the one-off expenditure write-off is INR 9.87 crores. So the two line item which has pushed the bottom line expenses on the higher side, one is advertising and the other is the exceptional expenditure.
Now, to your second question on gross margins, we have done price hike for certain articles we have just recently done, and we are in the midst of doing a 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 will stabilize in the next two quarters. So we have done some increase now, and we are going to be doing some increase post-festive.
Okay.
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 a couple of stores renovations, so that-
Renovations, so yes. Yeah, so we have also taken some store renovations this year. I do not 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.
Understood. That is very clear. Thank you.
But if I see largely the other expenses, it is mostly on the store closures and the advertising.
Understood. Thank you so much. All the best.
Thank you, Aabhash.
Thank you. Our next question comes from the line of Ankit Kanodia with Zen Nivesh Advisors Private Limited. Please go ahead.
Yeah. Thank you for taking my question. Sir, we have 737 EBOs, and even though total revenue from EBOs might be flat, but if I have to break it down into, say, three, four segments, like there would be some large stores which would have opened in the last few months or maybe quarters, which are still to mature, and there would be some large stores which would have come last year, which would have shown good number. Then there would be some stores which are smaller and still doing well, and we continue to keep them. Then the last one would be where stores which are getting shut down.
So if you can give some color as to how each of these four Direction, as in, I'm not looking for a definite number, but something more color into all these four buckets, how they are performing, how this 0% growth is coming. I think some would be doing really well and some would be doing really bad, and net-net it would be zero, right?
Thanks, Ankit, for the question. I think, look, the newer stores which have opened, the newer stores usually take time to settle down, and that is usually for any store to start performing well, it at least takes 12, 15 months for it to reach some sort of maturity level. Whatever newer stores we have opened, we have not opened too many new stores, but whatever we have opened over the last 12 months, they are growing steadily, and we are seeing decent SSG also in those newer larger stores. As far as the smaller stores are concerned, rightly you said, many smaller stores continue to do well because it might not have any other larger store in that vicinity, and maybe that mall and high streets are doing well. Some smaller stores still continue to do well, unlike some other smaller stores.
The third bucket of stores, which are even our daily wear concept stores, which are about 21 of our stores. The 21 stores where we have kept top wear and a little bit of menswear have actually picked up speed and done well over a period of time. Like I mentioned in my previous calls, we continue to deliver about INR 1,000 of sales per square feet per month, which is a good number for us, which we think to begin with. We have reached 21 stores, we have seen good traction. We are going to be adding another eight, nine stores. The sample set of 30 stores, it will tell us what should be our future strategy as far as expansion is concerned for this format.
The larger question of large store versus small store, if I look at my overall network of large store versus small store, my larger stores are SSG positive. If I take stores which are greater than 750 sq ft, they are about 2%-3% or higher SSG, whereas my smaller stores continue to be negative. When I read the different types of data, it is very clear that we need to pivot from a smaller to the larger concept. However, obviously, because we are on a very big base of 737 stores, the transition takes time. We will continue the transition of smaller to larger stores in the quarters to come, but it is very difficult to give a definitive number on how many small stores I will be shutting and how many larger stores I will be opening.
That is purely on the basis of what real estate we find.
Got it. That was very helpful. I am not asking for, again, a definite number, but just looking at the pattern, as in, we closed around 40 stores in FY 2025, and we closed around 54 stores in FY 2026. In H1 FY 2027, we have closed 89 stores, right? Is it fair to assume that in terms of closing down of stores, the heavy lifting has been done in H1, and from H2 onward, the direction should be lower, as in, it should be lower setting down?
We are considerably lower, Ankit. I mean, look, if you see Q2 versus Q1, the number of stores have reduced, the closures have reduced. In Q1, I think we had more than 58 or 59 closures. In Q2, you can see it is 23. In Q3, it will be even lower. Directionally, now the margins in the P&L will start going up by virtue of lower closures. Directionally, I think the ratio of closures will considerably come down, and the margins also should start improving on that basis.
Right. One last question, if I may.
Please go ahead.
yeah, last year, second half, so I am talking about FY 2026 H2. So from there onwards, our revenues have dipped a little. Prior to that, we were doing really good. Now, when we have this base effect here in terms of the festive season being shifted to Q3 rather than Q2, and how we are positioned, and also in terms of the price hike which we have taken, is it fair to assume that, again, not asking for a definite guidance, but year-on-year numbers from H2 should be much better than what we have seen in H1? Come year- on- year.
Certainly, yes, Ankit. Q3 should deliver a good number for us. So if in this tough time
This year and Q4 should deliver a good number for us.
Yeah. So if in this tough time, if we had managed 0.2 SSG, directionally, we should be able to achieve our target of closing the year with a positive SSG, right?
We are keeping our fingers crossed. Hopefully, we should be going in that direction.
Yeah. Thank you so much. That was all from my side, and all the best for the future.
Thank you, Ankit. Thank you.
Thank you. Our next question comes from the line of Avinash Karumanchi with Motilal Oswal Financial Services Limited. Please go ahead.
Thank you, sir. My question is regarding the gross margins. If you look at it, this quarter, actually, LFS, which is a low-margin channel, that has declined, and EBO was continuing to do well. Despite this, we are seeing a RM pressure, which is why the margins went down. My question is, how much of the inventory with the new RM prices were reflected in this current quarter's sales? It will be a general process, where the inventory will be straight over. You will be already sitting on a good amount of old inventory. I am just trying to understand how much of these more impact will become—
You're asking, yeah, how much more impact. See, it's very difficult to judge that, and I'll tell you why. As the RM prices have increased, we've also done the increase in MRP in some of our articles. It's very difficult to judge, what is going to be the further impact on gross margins. My estimate is, see, this quarter, we had a 200 basis points impact on our GM. I think in the next Q3, we should be having a gross margin impact of anywhere between 100 and 200 basis points, is my estimate. Difficult to judge this, but roughly, I feel our GM impact should be about 100 to 200 basis points in quarter three.
Okay. If I look at the ASP, it is up by 6%. Is it a reflection of the price hikes that you've already taken, or is it just a channel or product mix that's happening?
It's a combination of many factors. Maybe little bit of price hike. See, price hike wouldn't have shown now because we've just done the price hikes recently, so it wouldn't show up in the ASP that soon. In bottom wear, we've come out with many value-added products which are of that INR 800, INR 900 selling price. Also, because our daily wear concept also has picked up and it's become 21 stores, the top wear in these 21 stores are obviously of a much higher ASP. So there would be a small impact of that as well. So I think it's a combination of new bottom wear products and some of the top wear also selling well in the 21 stores.
Okay. It's mostly a product mix-led changes.
Yeah, it's not a price hike-led mix yet.
Okay. Finally, on the last one, more of a qualitative print. You are partnered with a new brand ambassador. I'm just trying to understand, not only that, and also the scale-up of the larger stores. How are the footfalls and conversions tracking? Because when you close two smaller stores and open a big store, then you're spending on A&P. Is the footfall generally higher than what you used to see earlier, and conversions also, or how are you looking at it qualitatively?
See, from an advertising perspective, because the Shraddha campaign has just started post-July, we'll be able to assess and gauge the campaign only after festive period gets over, Avinash. Right now, whatever little bit fillers we are getting, the campaign is doing well. On a concrete basis, we'll be able to gauge that campaign only post-festive. As far as opening one large store and consolidating two stores, we've seen that a good part of the revenue of the two stores get converted into the larger store within a few months. I think that business moved immediately. See, I'll give you an example. We've shut so many stores, right, over the last six months, but we have not seen a drop in turnover.
It very clearly indicates that whenever we are shutting those smaller stores, the revenue by virtue is moving to the larger ones immediately. In fact, the entire revenue will take little more time to move, but a good part of the revenue moves immediately. That's why you don't see a degrowth in our turnover for H1, even after closing so many stores between last year H1 and this year H1.
Got it, sir. One last question, if I may ask.
Yeah, please go ahead.
This is a follow-up to the earlier participant regarding the SSG only. This quarter, despite the festive shift, you are still on a flattish kind of SSG, which is an encouraging sign compared to the last couple of quarters. Will you see an improvement, or what is driving this improvement going forward for the next few quarters?
Fingers crossed, Avinash Karumanchi. The data looks good. We have been seeing 49 days to festivals. We basically calculate 49 days to Dussehra, 49 days to Diwali, and the number is looking decent. We would wait for the quarter to get over to do a full summary of how the quarter has gone by. But quarter 3 has been decent for us.
Okay. Thank you, sir. That's it from my side.
Thank you. Our next question comes from the line of Sameer Gupta with India Infoline. Please go ahead.
Hi, everyone, and thanks for taking my question. Firstly, Gautam, today, system of 737 stores, can you just give a color on what would be the proportion of 700-plus sq ft stores now in the system? Also, what is the sense on the store closure pipeline, wherever you have visibility, say, for the next 12 months?
Yeah, just one minute, Sameer. I'm going to take that data out of what is the breakup. I don't have it handy with me. Just give me a second. Okay, I'm not having the updated number for 737 stores breakup, but I'll give you a rough idea, Sameer. Just pardon me if I'm wrong, but anyways, I will give the data through SGA, but I'll give you a rough idea. My understanding is, the small stores are anywhere between 120 to 150 stores, which are less than 300 sq ft. The 700-plus sq ft stores are about, if I'm not wrong, it's closer to 90 or 100 stores. Again, these numbers are just off my fingertips. I will send the accurate data through SGA tomorrow itself.
Got it. The number that you cited of SSG negative, that is for the less than 300 sq ft stores, not for the less than 700 sq ft stores?
No, no. See, what happens is, Sameer, when we look at SSG, right? Sometimes, even the last, many stores, even the last store, some of the stores will be negative because that is a result of how the market and the mall are doing. So, I cannot take those exceptions into account. If I have to look at a proper sample set, most of the negative stores are the ones which are the small ones. So, I would be wrong
It is less than 300.
in saying that every, yeah, less than 300, correct. So, I would say most of the negative stores would be less than 300. That would be the right way to put at it.
Got it. I mean, that is helpful. Basically, less than 20% of the stores now are where you would say that largely the problem is, 80% of my network is now where I want it to be. Of course, it will get better with time.
Well, not really. I will tell you, I agree with what you are saying, logically. But for us, the stores which are in the 400 to 500 range also, even those stores we need to increase in size and make it 700, 800 sq ft . Though the 400, 500 is not a very big issue for us, the larger issue are the very small ones. But even the 400, 500, over a period of time, we need to slightly upgrade and open a larger one.
Okay, let me frame a question in a different way. Whatever your definition is a problem area, what would be the percentage of that cohort?
It should be 20% to 30% of the stores. Again, what I do not know, Sameer Gupta, because this is a very definitive answer. When we share the stores by bucket through SGA, I will answer this particular question of yours with that data.
Got it. I mean, I'm not looking particularly a particular store.
No, no, but because-
Everything is a judgment.
Because you're asking a specific, I know, but because this is a specific question on a particular number, I've given you a rough ballpark. Exact numbers, I will give it through SGA.
Sure. What would be your estimate of the pipeline of store closures, let's say, in the near term, or 12 months from now?
See, again, hard to, because this number changes based on what real estate we find. The closure for Q3, from what visibility I am getting, will be anywhere between 15 and 20 stores, as of now.
Got it. Fair. Second question is on the input cost inflation for your category that you are looking at in fabric cost. I have a follow-up, but let me take that answer from you first.
Yeah, see, I mean, look, obviously, the RM prices have gone up. We thought it will cool down in July, August. It cooled off a little, but still the prices were high. Look, we had to take hike in some products of ours where we feel the impact has been larger. Like I had mentioned to even Ankit also, some products we have taken the hike, some we will take post-festive. I think over a period of time, this GM impact, what has happened of 200 basis points, what you can see in our P&L, this should improve and go back to the older number.
Got it. I was actually asking about the quantum of inflation that you are facing. Is it 15%? Is it 10%?
It is between 8% and 10% is what I understand. Because the yarn prices and fabric prices have changed every month. But if I have to just take a blended, I think it is about 8% to 10% is what we see.
Got it. Now, follow up to this. Basically, if I look at your Ending inventory, which is largely a finished goods inventory, it is around INR 267 crores.
Right.
And if I look at the first half COGS plus subcontracting, it is around INR 168 crores.
No, no, one second. Sorry, the INR 267 crores is which inventory you said? Can you just repeat it?
March ending.
Yeah, March ending was INR 268 crores, correct.
Right. INR 268, sorry.
Yes, sir.
If I look at the first half COGS, the one that you report in the P&L, plus even the subcontracting charges, that's around INR 168 crores.
Okay.
Logically then, most of the inventory gets used up in the first half, unless the March ending inventory was itself sitting on a higher fabric cost. Why should there be any GM pressure right now in the P&L? I understand fabric costs have gone up, but that would be sitting in your inventory, right? Because you'll be still be using the older inventory to-
No, sorry. No, but see, that differs from product to product. Some fast-moving products, the inventory days would be much lower, some would be slower. So, very difficult to bridge the gap, what you're saying. See, it would be, if all my products sold at the same rate of sale, maybe what you're saying would be true. But it's very difficult to bridge what you're saying from March's number to this number.
Okay, got it. You are actually sitting on a higher aged inventory as well, and you do not see that as a problem?
Yes, we would have older inventory at the older price. What you are saying is right. But from an impact to GM perspective, my hunch is that the impact would be anywhere between 100 bps to 200 bps in quarter three.
Got it. Got it, great. That is all from me. Thanks and all the best.
Thank you, Sameer. Thank you for the wishes.
Thank you so much. Our next question comes from the line of Madhur Rathi with Counter Cyclical Investments. Please go ahead.
Sir, thank you for the opportunity. Sir, what I wanted to understand regarding the receivable day, receivable number, it has moved from INR 106 crores to INR 125 crores, and our LFS revenue has declined. So, I am not able to understand why has this increased. It is in-
Yeah. Yeah, see, it has also happened on the line of our online receivables have gone up a little bit. We have also started doing little bit of quick commerce. So, on that basis, some of our online receivables have gone up. Even our export receivables for the Dubai store, we have some receivables pertaining to that. So, the spike is largely because of non-LFS business. I think it is more relating to online.
Right.
Because we have started doing quick commerce, and we have also started doing online. We have also started doing on an SOR basis with Amazon. So, quick commerce and Amazon put together has caused some spike in our online receivables from March.
Gautam, I wanted to understand that our small stores seem to be doing all right till FY 2025. Then suddenly what happened that the smaller stores, basically, the SSG deteriorated?
See, I think, look, the deterioration in the SSG obviously happens over a longer period of time. It is just that it was more visible maybe from FY 2024 or FY 2025 onwards. That is when we also started noticing the trend. See, for anything to show up, it gradually takes place. It is just that it became more evident from that point of time.
Understood. So, now, Gautam, are we totally exiting the 300 sq ft stores, or we'll keep some of them which are anyway doing good business?
See, it's going to depend that availability of real estate. I'll give you one small example. Now, there is Inorbit Mall in Hyderabad where we have a 200 sq ft store. In that mall, that store does extremely well for us. It's an exceptional store. But that store, there we don't see ourselves getting a 600, 700 sq ft store over the next 15 months, because renewals are yet to come in. So, in such cases where there is no real estate in that particular area, we might have to continue our smaller stores till that period.
Okay, so but ultimately we will exit all the 300 sq ft and-
Yes, eventually, yes. I also know one more thing. When I have selected the 700 plus sq ft, I do not want to be in a situation after three years where again I am in a situation where 700 is turning out to be tight. In a 700 plus sq ft store, I have enough room from a long-term perspective to manage in that format. So, eventually our bottom wear is going to be in the range of 700-800 sq ft, or maybe little more, maybe 700-900 sq ft. And eventually, over a longer time horizon, we will exit all our smaller stores. That is the plan.
Understood. Gautam, is it that the only issue is the store size, or is it that all the B2C brands and fast fashion brands like Zudio, et cetera, that have come up in the, let us say, last few years. Have they basically eaten a pie, and maybe that impact is also there? Or is there some issue with the merchandise that maybe ultimately the merchandise has to be attractive enough? Or is it really confined to the 300 sq ft stores? I mean, are we clear that what is the ailment and whether the diagnosis is correct?
See, I will tell you what is it. In my management view, if you look at it is purely to do related only with the store. Now, why that store makes such a big difference? See, for any business to continue growing, you need to have existing customers coming back to the store, you need to have new customer acquisitions, et cetera. When your store is very small, it carries an inherent perception that the range of what you are carrying in terms of products will be less, will be confined. So, what a larger store does, it increases the frontage of the store. See, a smaller store frontage will be anywhere between 10 and 12 feet. When you take a larger store of, say, 700 sq ft, it will have a minimum frontage of at least 19, 20 feet.
When you get a frontage of a 19, 20 feet or plus store, the visual merchandising of the number of products what you are having increases dramatically. The customer first experiences the store, then experiences your product. The store is, if you ask me, the store is the real reason for our slowness, and I think the larger store is what is going to fix it. From a merchandise perspective, I can tell you. Sorry, go ahead. Please go ahead.
No, no. Please go ahead, Gautam, on merchandise.
From the merchandise perspective, no brand can be perfect. Yes, there will be always gaps in every brand's product portfolio, right? But when I look at our portfolio of products, we are well diversified in today's product of bottom wear, what the younger consumer and the millennial consumer is asking for. So, I think it is not a merchandise problem. As far as competition is concerned, like you mentioned competition was always there, right? I mean, Westside, Zudio, you just mentioned these big names, right? They have always had bottom wear. So, I think even prior to COVID also, if you take all the larger format stores keeping top wear also kept bottom wear. So, I don't think it is something which has dramatically increased only in the last two years.
I think our problem of growth, our headwinds of growth is because of our store format rather than anything else, is my and management view.
Gautam, why have we got into menswear? Because anywhere the small store has no room to keep, to display all the merchandise of our core women wear. Then we have gone on into menswear.
Yeah, I will clarify it. See, the menswear and the top wear what we are keeping for women and the format we are keeping in, that is different from our bottom wear stores. See, this pilot what we had planned, we had planned this, we are working on this pilot for last two years. Now, what happens in this pilot, Madhur, we take store sizes of anywhere between 1,500 to 2,000 sq ft, and in that, we accommodate bottom wear, we accommodate women's top wear, and we are given a very, very small space for women for menswear. That pilot and that concept is completely independent of the bottom wear story, what I am talking about. Out of the 737 stores what we have today, 736 stores are in India.
In that 736 stores, 21 stores are stores which are greater than 1,500 sq ft per store, closer to 2,000, where we are accommodating all the other merchandise, and that is merely a pilot, which I also mentioned in the earlier call that we will open another eight, nine stores and see how that business is doing. If that business does well and it clicks for us, the top wear becomes a new growth engine for us along with our bottom wear.
I understand. But still, Gautam, I mean, it sounds like a knee-jerk reaction, especially getting into menswear. Okay, we can try since women are our customer, so we can try to sell more things to women. But to get into menswear, which is altogether a different segment, somehow it does not sound, I mean, it just sounds kind of desperate.
Okay.
But in any case, since you mentioned it's a pilot, I think we got to try many things, and something will click, and we'll push that. That's totally understandable, Gautam. Now, Gautam, when we are doubling our-
Just one question, Madhur. Just one question, I'll just clarify before we go to the next question. I understand that menswear sounds very bizarre, but for the kind of daily wear concept we wanted to create, keeping menswear becomes important. We also understand that we are a women's wear brand. That is why in all these stores, wherever we have done the daily wear concept, the menswear space allotted is only 10% to 12%. 80% to 85% space or maybe more has been allotted for women. And right now, that menswear, which I'm giving 10% to 12% space, is generating that kind of sale from that area. So, the men who are coming with the women, these stores, they are buying. So, in the pilot, we've been very careful that we don't overdo it as far as menswear is concerned because we know our strength is obviously women's wear.
I just want to add this point to that question. Yeah.
Sure. Now, Gautam, that we are planning to double our square footage over the next five years, have we evaluated a FOCO strategy, and why do we want to put the rent and everything on the company's balance sheet? Aren't we getting enough people who are interested in our franchisee?
Madhur, I will tell you, your question is very right. Franchising, non-franchising, there is no one right way to go about it. What I have seen from my past experience for a format and supply chain business like us, we feel a company-owned, company-operated model is a better model, where we would like to have full control of the inventory at a store level. I would not say COCO is better than FOCO or FOCO is better than COCO. The strategy works differently for different brands. For our kind of supply chain, for our kind of template, we feel COCO is better. Because our payback periods have been attractive, even if we are going to be investing and doubling our square feet, from a cash flow perspective, our operating cash flow will be far higher than what we are going to be investing on store openings.
We feel that a COCO model kind of a system is a better suited model for us.
Understood. Lastly, Gautam, last year we did around INR 182 crore LFS revenue, FY 2026 I am talking about, and on that we gave a discount of INR 61 crores. Is this INR 61 crore discount, is it only attributable to the LFS? Yeah.
No, no, I will tell you. I am not very sure of the INR 61 crores number. I have to see the P&L to exactly know. But any discount given in LFS is largely margin to the LFS. What happens is, most large format stores, what they will do, they will take a big part of the margin when we build a product to the large format store. About 5%-6% of margin is something which is debited on us later through the year based on a mutual understanding on promo participation, which is not really discount. It is the promos what large format stores run at a store level for their overall marketing. Any discounts which hit the top line for LFS is largely additional margin what we give through the year, which usually the reconciliation happens in quarter four.
If you notice from one of our larger large format store partners, we usually get the credit note only in the last quarter of the year as a reconciliation hit. To answer your question straight, it is more margin than discount.
Gautam, if we compare, FY 2026 LFS sales were INR 182 crore versus INR 202 crore in FY 2025. LFS revenues fell by around INR 20 crore last year, whereas the discounts increased from INR 44.5 crore to INR 61 crore. There is a-
No, no, see-
like significant delta.
Madhur, I will check up. What Mohan, my CFO, and I will do is we will check up where the INR 61 crore number came from, and we will send a clarification note on that. But the one thing I definitely know that the reason why we had a fall in LFS revenue from FY 2025 to FY 2026 was because in Q3, with one of our larger LFS partners, we had major supply chain disruptions in last year Q3. By virtue of that, we lost out on a lot of billing and sales in Q3 last year, which impacted the overall revenues of FY 2026. As far as discounts is concerned, it cannot be a number of INR 60 crores. Anyway, I will go back, check, and send a clarification note.
The margins which will be where we will be passing a credit note to the LFS partner will be to the tune of 5% to 6% of LFS sales, and not any more.
Mr. Rathi, have you done with your question?
Hello?
Yes, Mr. Rathi, can you hear us? All right, it seems Mr. Rathi has disconnected. Okay, ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
I would like to thank everyone for being part of this call. We hope we have answered your questions. We are undertaking a comprehensive transformation in our store format strategy, our product portfolio, our brand investments, and our new business initiatives. The transformation will take time to fully manifest into our financial numbers, but the early signals are very encouraging. If you need any more information, please feel free to contact Mr. Divyendu Dua from SGA, our investor relations advisor. Thank you.
Thank you so much, sir. Ladies and gentlemen, on behalf of Go Fashion (India) Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.