Aditya Birla Fashion’s Q1 is forgettable, and its troubles are far from over
Madura segment fared better. On a like-to-like basis, Pantaloons and Lifestyle brands (part of the Madura segment) growth fell by 8% and 3%, respectively. This implies that revenue growth was driven primarily by network expansion and new businesses (such as Reebok and TMRW), point out analysts from Kotak Institutional Equities.
Amid this, Ebitda declined by nearly 38% year-on-year and margin took a significant beating, contracting by 715 basis points to 9.15%. Ebitda margin was adversely impacted by higher marketing spends, increase in rental expenses on the back of store additions, and growth investments in subsidiaries. Ebitda is earnings before interest, tax, depreciation, and amortization.
One basis point is one-hundredth of a percentage point. A sharp fall in Ebitda, coupled with higher depreciation costs and finance expenses, meant Aditya Birla Fashion reported a net loss of Rs161.6 crore. The company said Q1 net profit was affected by negative operating leverage, resulting from subdued sales for the Pantaloons business, as well as continued investments in TMRW and ethnic businesses.
Post results, analysts have cut earnings estimates. The company expects demand to recover in the second half of FY24. Investors need to watch how that pans out.
Also, the debt scenario needs closer tracking, especially after the sharp quarter-on-quarter jump. The management told analysts that net debt at the end of Q1 stood at Rs2100 crore. This is a sharp increase from Rs1400 crore at the end of Q4FY23.
Against this backdrop, Aditya Birla Fashion’s shares were trading around 5% lower in Monday’s morning trade. Many analysts remain skeptical about the path ahead. “Aditya Birla Fashion’s aggressive strategy of expansion (organic and
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