Go Fashion (India) Limited (GOCOLORS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the GoFashionIndia Ltd. Q1FY27 earnings conference call. 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 continues. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Sarawhi, CEO, GoFashion India Limited. Thank you and over to you, sir.

Good evening and warm welcome to everyone present on the call. Along with me, I have Mr. R. Mohan, our Chief Financial Officer, and SGA, our Investor Relations Advisors. I hope you have all received our investor tech by now. For those who have not, you can view them on the stock exchange on the company website. On the last call, we laid five clear principles and priorities for FY27. I want to spend a few minutes giving you a sense of where we stand on each of these one quarter in. Priority one was turning SSD positive. This was our single most important commitment for the year, and I'm pleased to share that we have started FI27 on the right note. Same store sales growth for our radio channel turned positive this quarter at 0.6%, and same cluster sales growth was at 1.2%. This was the first positive SSG in several quarters. It's still early to call this as a firm trend after just one quarter, but it's moving in the right direction we wanted, and it keeps us optimistic for the coming quarters. Priority two was to migrate to larger size stores. We continue to make progress here, despite the quarter, during the quarter, we closed 66 stores in the catchments where we already have or we are going to be opening a larger commerce store nearby. As a result, our total retail space reduced by 7,000 square feet in this quarter, even as we continue to add larger stores elsewhere in the network. Based on our current review, we will continue this transaction over the rest of FI 27. Larger stores can hold a full range and give customers a much better premium experience as far as shopping is concerned. We are also continuing to upgrade the look and feel of our existing stores through the year. Our store expansion strategy will continue to remain calibrated and selective with a clear focus on entering 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 potential to double the square feet deployed in the business. This new business strategy will lead to revenue maximization and cost optimization. Priority 3, refreshing the product portfolio. We continue to refresh our product portfolio with new additions and we will add new styles aimed at a younger trend-conscious customer. Over FY27, we plan to add 10 to 12 new refreshing products for our customers, not just like extensions, but generally new formats that will open up new purchase occasions and consumer cohorts. Our aspiration is clear to be a definitive one-stop destination for women's waterwear in India. We have onboarded Sharda Kapoor as our brand ambassador from July. This is intended to strengthen the brand salience and bring us to a wider, younger audience. You will see this reflected more visibly across our marketing and stores over the next coming months. The priority score was expanding our new pilot dailyware concept. We currently have 15 stores of the new dailyware concept. We remain committed to our target of scaling our dailyware stores to over 25 to 30 stores by the end of FY27. The unit economics continue to hold up well in the stores where we have gone live. Our priority 5 is LFS channel recovery. This is another area where we saw genuine progress. LFS channel grew 2% on a year-on-year basis to Rs.50 crores, a clear signal of returning to some sort of normalcy after a difficult FY26 that included operational disruptions with a key LFS partner. We continue to work closely with our LFS partners on assortment, placement, and sell-through to ensure channel contributes meaningful to the growth for the balance of the year. So, across all five priorities, Q1 has given us an encouraging set of data points. Coming to financial performance. Our revenue and gross margins remain stable compared to Q1 last year. I want to flag one specific item in the P&L this quarter, an exceptional expense of Rs.6.50 relating to the write-off of capital expenditure on account of the store closure we did during the quarter. This is a direct consequence of network consolidation strategy and is a one-off item. EBITDA before exceptional items stood at Rs 67.4 crores, a 2% degrowth. The moderation was largely on account of incremental marketing investment we took during this quarter, including the brand ambassador partnership. Our advertising expense as a percentage of revenue stood at 2.3% for Q1 FY27, and we expected to remain the same range between 2 and 3% in FY27. Full price sales for the quarter stood at a strong 94% and our average selling price came to about 8.63 rupees. A working capital day stood at 139 days with inventory days at 100 days. We believe there is room to optimize this further by a few more days, which will contribute to a strong balance sheet and support long-term sustainable growth. To sum up, quarter one FY27 was a quarter where we began to see some progress against each of the five priorities we set out for the year, SSG turned positive, our store transition, our product and brand initiatives, including getting a brand ambassador partnership underway, our daily wear concept, and LFS showing some genuine signs of recovery. We are very conscious that one quarter does not make a trend, and we intend to stay disciplined and measured as we build on this momentum through the rest of the year. But we are encouraged by the direction, and we remain confident that in the underlying strength of the business, Gokalas continues to be one of the most recognized and trusted names in women's bottomware in India, operating in a category where organized players still have a long runway ahead, given low penetration levels that persist. With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for update on 401 FY27 results and financials. Thank you.

Thank you, Gautam, and good evening, everyone. I will give you the financial highlights for Q4 FY26. Revenue stood at Rs.223 crores, flat year-on-year. Gross profit stood at Rs.140 crores with a GP margin of 62.9%. EBITDA before exceptional expense stood at 67 crores. EBITDA margin stood at 30.3 crores. PACs stood at 16 crores. ROCE and ROU excluding India's impact stood at 10.8% and 7.9% respectively. Cash and cash equivalents stood at Rs. 202 crores as on 30th June 2026. With this, now we will open the floor for question and answers.

Thank you very much. Now we begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers 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 Samir Gupta from India InfoLine. Please proceed.

Hi, good evening, everyone, and thanks for taking my question. Vatam, I heard your opening remarks, and you mentioned that the exercise to close a small store and open a larger one will continue over the rest of FI 27. So in this context, what kind of net retail area growth are you looking at for this particular year?

See, I think from an area deployed in the business, from a square feet deployed in the business on a year through basis, I mean, we should be at around, we should add about 8 to 10% of square feet space. But that will be on a year through basis. To measure that on a quarterly basis will be tough. Like even in this quarter, you see actually 7,000 square feet has reduced.

But on a year through basis, 12 month basis, I think 8 to

10% should be, should result in our square feet increase in the business.

So, suffice to say that it will happen over the course of the year and back-ended.

Yeah, yeah, correct.

Got it, fair. And on the same store sales growth, so I understand this quarter is 0.6%, but let's say you remove all the stores that have been closed over the past one year, this quarter including, and you also remove all the stores that you intend to close in the coming quarters. Then what does this SSS number look like and how has that number trended over the last few quarters?

No, this number, SSS, what we have reported, Samir, this excludes the stores which have closed in Q1. Because those stores would have closed over Q1. So those numbers will not be in, we won't be able to compare them with Q1 last year. So we have excluded the stores which have closed in Q1 out of the SLC calculation.

Yeah, but the stores that you intend to close and have not yet been closed, those won't be included, right?

No, those won't be excluded, but for us to exclude that, I mean, I've not checked that percentage, but in the number what we have reported, we have not excluded any future stores.

Got it. No, no, I understand that.

No, I've not done the calculation. I've not done the calculation.

No worries. But then, so the other question then is that one would assume that if you were to remove all the smaller stores from the system, the SSG then would look healthy. But 0.6%, there could be a natural improvement that has happened over the quarters.

Thank you.

You're saying how do I attribute?

I'll tell you. I understood why your question is. I'll tell you. See, the 0.6% could have many reasons. I'll tell you the three reasons which I think. A, it also can be because of a favorable base, maybe because Q1 last year was very weak, so this year is showing 0.6%. That is one possibility. The other possibility is that the smaller stores, what we have closed over a period of time, some business of those stores would have moved to another source, which could have improved the SSSE. The third reason would be also that Q1 in general saw better footfalls and demand compared to the earlier quarters. So I think your question is right. It's very difficult to attribute the 0.6% to what is the reason why we have seen an improvement. That is why in my commentary, I have very clearly said that this does not set at 10. We have to wait and watch how this positive SSD unfolds over the next few quarters. I mean, even as management, we were also, we can't get very excited looking at the 0.6, thinking that this is the new reality. We are also taking it with a picture saw, saying that this can be a one-quarterly trend, and we are wary of it. So, we are being very careful, and we will look to build on this and show positive SSG in quarter to quarter three. This definitely is a 0.6, it does not mean it's a trend.

No, no. So, I was actually asking the other thing. Basically, what I was basically saying is that even if we remove the stores which are small, the SSG is not a, I understand it's an improvement, but it's not a very exciting number, right? 0.6% SSG. So, how are we able to then concentrate the small stores that are the problem?

No, so for me, see, the 0.6 is a blended number of stores which are already small in the ecosystem, which today also are small in the ecosystem. And a combination of large stores. Even today, we have 100 plus. Yeah, see, if I look at my larger stores SSSD today, they are much better than what my smaller stores SSSD are. If I take my SSSD only for stores which are greater than 700 square feet, they are obviously much better than what it is for my smaller stores. That is the reason why we began this transition to begin with. That was the proof in the pudding for us. Yeah, so the SSSG growth for 700 plus square feet per quarter one was in the range of 2.5 to 3%.

And the number of these stores which are 700 square feet in the system would be 700 square feet plus?

It would be more than 130 stores in the ecosystem.

Got it. Thanks.

Thanks. I'll come back in the few.

Okay. Thank you.

Thank you. The next question is from the line of Avinash Kurumanji from MOSN. Please proceed.

Good evening, sir. So, I just want to check how far through are we in this store closures currently? How many stores are we going to expect for the closure in FH 27?

Yeah, so Avinash, it's very difficult to give a guidance on either on store openings or closures. It's very difficult to give a guidance because both are interlinked, right? Because when we are opening larger stores, we are also closing smaller stores. So it all depends on the opportunity of the larger stores available as well. So it's very difficult for me to bridge and say that how many stores we are going to close. But I feel it's definitely not going to be as intense or high a number as what we have seen in the last few quarters. It will definitely be a much lower number, but to give a number of stores guidance is very tough for me because it's directly linked with what large store opportunity we get during the year.

Got it, got it. And just lapping up on Samir's question, so last quarter you said that you are having somewhere around 250 odd stores which are doing 10% SST. Now you said that these other larger format stores are doing only 2-3% kind of SST. Is this a deceleration or am I looking at a different base altogether?

No, see, last year, the statement what I made in the last call, I just have to go back and see why I made that statement. I'm not able to recollect it. But to Samir's specific question, if I take a blended average of all the bottom-wear stores which are greater than 700 square feet, in quarter one, we have given about 2.5-3%. But, you know, the statement why I made in the last call, in which context, I just, I'll have to go back and just see it, and maybe I can answer this question after the call through SGA, I can send the clarification.

So, basically, what we are trying to look at is, like, is there any kind of a difference in the SAC between stores of vintage or stores of, what do you say, malls and high streets? That's what we are trying to look at it.

See, malls and high street, malls and high street, there's no real outlier between the two. As far as vintage is concerned, when I checked 700 square feet plus stores where they were delivering 2-3%, I could see that trend even in the older 700 square feet stores. See, we've had stores of 700 square feet also historically taken. So when I see it across vintage, it was showing similar trends.

Okay, okay, got it. And the next question would be, like, regarding the RM cost, so what kind of implementation are you looking at at the current RM level?

See, right now, we have seen inflation as far as public cost is concerned. We have seen it go up in the last few months because of the entire Middle East situation. It's caused a situation where RM prices have gone up. Right now, we are not looking at price heights, honestly. We will have to wait and watch. We are waiting. We are hopeful that these prices will stabilize and fall. So, right now, we are not taking a price hike. But having said that, these inflated RM prices could impact the gross margins in the coming quarter. It's difficult to quantify how much it will impact because we are also adding older inventory in the system, we are also adding newer inventory in the system. So on a blended level, how much is going to impact the GM is difficult to say. But as how much is increased now, we feel that in the coming quarters, it will stabilize and it will fall.

Okay, okay.

Sorry, I just want to complete my last sentence. The RM prices will stabilize and will fall, is what I'm saying, not the gross margin.

Okay, okay. If not about the gross margin impact, could you quantify how much fabric cost increased, have you seen?

From what we have seen, I think the fabric cost has increased anywhere from 7 to 10 percent, is what we have seen. Okay, okay. I'll switch it.

I'll join the team. Thank you, Avinash.

Thank you. The next question is from the line of Shriyansh Jain from Swan Investment. Please proceed.

Hi, thank you for the opportunity, sir. Sir, I have one question. Can you help us understand, say, what would be the SSSG for, say, stores which are more than three years old, stores which are less than three years old, and stores which are less than a year old? If you can break that up into these three buckets, it will help us understand the SSSG trend, sir.

Yeah, actually, I'm not having that data right now with me handy. I will, once I have that data, because I'm not able to remember, it's not immediately signed. I'm not remembering because of these three buckets what you just mentioned. I'll send it across to SDA.

Any sense you can give us, sir, on what the SSSG would be for our matured stores, if not these buckets?

I can give you a general idea. When I had a look at our SSSG of different store sizes and all, I could see that even our older stores, which have opened in FY20 or FY19, even they are showing good positive growth. So I think it was, for us, what we've seen, this positive SLSG for the store, which have been positive, it has been across all vintage and financial years. Now, how many stores, an exact number, I don't have, which I'll obviously send it to SGA. But to your question, the answer is, yes, we have seen the growth easily, even in our vintage stores and older stores as well.

And this growth would be what? Low single digits or mid to high single digits? It varies.

It varies. There are some stores which are like FI 18, which are growing at 10%. There are some stores in FI which have opened as early as FI 24 also could have been in degrowth. So it's a mixed bag. There's no direct coordination with vintage here. It also comes down and depends on how the mall or the house that High Street is doing.

Got it, got it. And sir, what is the inventory number at the end of Q1? Inventory number at the end of Q1, I'll just tell you.

Just give me one second. It is 245 crores. Including RM, it is 245 crores.

Got it. And just the last question, can you help us understand the newer stores that you're going to open? What would be the terms there and the unit economics inventory plus KPEX?

See, very similar, the shorter, the smaller stores. I mean, we've seen that the unit economics are very similar. Our largest stores obviously do a much better revenue number than our smaller stores. Payback period would range in that range of 15 to 20 months will be the payback period. The inventory turns, you know, would be about inventory and largest stores would be around, if I'm not wrong, about 45 to 60 days on sales. And, what do you call, your ROI, like I mentioned, would be anywhere from 15 to 20 months, roughly.

Got it, got it. That helps. Thank you and all the best. Thank you so much.

Thank you. Before we take the next question, we would like to remind participants that you may press star and want to ask a question. Participant who wishes to ask a question, may please press star and run at this time. The next question is from the line of Siddharth from NAFA. Please proceed.

Hello, team there. So, my set of questions is that, you know, how is the, you know, new everyday wear concept stores performing? I'd like to get some, you know, clue on that in terms of the average store size across the, because from what I could see, you know, the average store size that's disclosed on industry presentation has the broad range. If you look at the new everyday ware stores from what I could, you know, have my source citations from, it's in the range of 3,000 to 4,000 square feet in average. So I'd just like to know how that cluster of, you know, new everyday ware is performing, and I would have my next set of questions based on that.

Yeah, thank you. So see, actually, in the new concept, in the everyday wear concept, our size requirement actually is 15 to 1600 square feet. In high street, sometimes, you know, we end up getting more space by virtue of availability because whatever stores we have converted into everyday wear. In the same building, we have taken additional space. And when we have taken additional space, some stores could have been in the range of 3,000 square feet. But our requirement of size is actually anywhere starting from 1,500 going up to maybe 2,000 square feet, not more. Now, how are these stores doing? These stores are doing well. Currently, based on the size the stores deployed, we are generating about 1,000 rupees of sales per square feet per month. And all the stores, I would say out of the 15 stores operational today, well, 13 stores are already profitable and doing well. And we have seen decent inventory turns also in this business. So as a starting step, I think it's a good start. And I think it will strengthen in the coming quarters. I think in festive quarter, we'll get a fair idea of how these stores are doing. But right now, the response has been very, very encouraging. 1,000 rupees sales per square feet. And out of the 15 stores, about 12 stores are double-digit EBIT dipositive.

Okay, understood.

So, and the next set of questions would be, I'd like to get some light on how your, you know, LFS spaces, you know, would pan out to be because there are some industry-wide issues that's being said relating to, you know, Reliance Azarte is being pushing their own brand into that business, affecting, you know, our LFS segment as well. I'm not conclusively saying this, but that is some speculation that I have been, you know, I mean, you know, going through about. So I'd just like to get some light on what the LFS long-term story is going to be, and how do you think it's going to fan out?

Yeah, sure. I'll tell you, we are not present in Azorte. We are present in Reliance Trends. So, Reliance Trends is a combination of external brands and private brands. Maybe what Reliance has done in the past is that they've converted their Reliance Trends store to Azorte stores. And when they convert that into Azorte stores, all the external brands exit and private label brands of Azorte takes over. Now, for us too, it's difficult to visualize how many such conversions any of our LFS partners would be doing. So, right now, the one thing I can tell you is that what supply chain disruptions we had with our LFS partners over Q3 and Q4 last year has normalized significantly, and that's also reflecting in our Q1 numbers. But the one thing I won't be able to guide or speculate is if there are stores which are getting converted into a different format of theirs. That is very difficult for me to know. But from our supply chain issues, destruction issue, what we had with one of our key LFS partners over Q3 and Q4, to a very large extent, it's normalized in 401.

Okay, okay. Understood. And my last question would be that, you know, that considering the new stores that's being opened, and there's also going to be some inventory releases from the, you know, closed stores as well. So, if you could just give me a good light on, you know, what the inventory increase could be over guidance number 4 and 527, considering you're also opening new stores and the inventory is released from the, you know, closed ones.

See, currently our inventory days is at about 100 days. I think by the end of the year, we'll be in the range of 90 to 100 days of inventory is what I think. Because this inventory is also carrying our daily wear concept, right? So this 90 to 100 days is actually including our daily wear concept. So our bottom wear inventory days is actually lower. But all put together, I think at a company level, we'll be at around 90 to 100 days. Difficult to give an exact number, but we should be in that range.

Understood, understood. And since you guys have a good level of cash, the entire, you know, spending is going to be, you know, financed through your internal accruals, right?

Yeah, yeah. We feel our operating cash flow will be strong enough to take care of all the capex.

Understood, understood. Thank you and wish you all the best. Thank you, Salat.

Thank you. Before we take the next question, we would like to remind participants that you may press star and run to ask the question. The next question is from the line of Ankit Kanodia from Zen Nivesh Advisor. Please proceed.

Thank you for taking my question. So my first question is related to the footfalls. I'm sure you would be tracking footfalls and their conversion. I know for some reason you might not be able to share it in numbers, but any qualitative color, how it has been going, that would be very helpful. That is my question.

Yeah, so Ankit, I think at a overall level, see, we track footfalls by bill cuts. So I think our footfalls has been, we've not seen a drop in footfalls. We would have maybe seen a 1.1.5% increase in footfalls on an overall basis compared to last year Q1. And this I'm talking from an EVO level. Okay.

Yeah, I've got it.

It's been very, I would say, very similar to what numbers we had. We've now seen drop in subfalls for two hours.

Got it. So, coming to the SSSG thing, which has been mentioned multiple times, I just wanted to make this clear that in the last call, you clearly said that if you add only the stores which have reported positive SSSG, and they were about 275 stores, and then that SSSG comes to 10 to 15%, 10 to 12%. That is the exact one.

Yeah, so maybe I would have mentioned this. I will just clarify this point because I need to look at a set of data before I make another statement of that. I will clarify this through SDA. I've written this point and I will definitely release a clarification note on this through SDA, on this point.

Sure, and my last question is, since we are increasingly looking at Do we have any plan to explore lingerie as well?

See, definitely it is there in one of our contention lists because lingerie and ladies' innerwear is a very important part of our everyday wear concept of women's what we have just launched, right, our daily wear concept. So, we are evaluating it and whenever there is an update on that, we will definitely pass on to everyone.

Thank you so much. That was all from my side and all the best.

Thank you. As there are no further questions, I would now like to hand the conference over to the management for the closing comments. Over to you, sir.

I would like to thank everyone for being part of this call. We hope we've answered your questions. We are undertaking a comprehensive transformation in our store format strategy, our product portfolio, our brand investments, and our new business initiative. This transformation will take time to fully manifest into our financial numbers, but the early signs are encouraging. If you need any more information, please feel free to contact Mr. Divyan Dhruva from SGA, our investor relation advisor. Thank you.

On behalf of GoFashionIndiaLtd, that concludes this conference. Thank you for joining us and you may not disconnect your lines.