Aditya Birla Fashion Q4 Results Review - Growth Led By Loss-Making Businesses: Systematix

Systematix Research Report

Aditya Birla Fashion and Retail Ltd. earnings missed estimates given higher losses in the fast-growing new businesses. Overall revenue growth of 18.3% seems strong in the currently muted demand environment. The apparel market remained subdued impacted by fewer weddings, weak winters and sluggish online sales. Among new businesses, Ethnic grew 2.7 times versus last year, TMRW sales doubled while Reebok saw strong growth of 29%.

The core businesses of Lifestyle/ Pantaloons grew 2%/ 10% YoY respectively. LTL growth for Pantaloons stood at 1% while lifestyle was flattish. Innerwear business grew 12% YoY offsetting the weakness in athleisure.

Standalone revenue growth stood at 8% YoY. Gross margin remained flat while Ebitda margin expanded 163 bps YoY to 8.3% led decline in employee cost (-35 bps), rent (-22 bps), other expenses (-100 bps).

Lifestyle business Ebitda margin expanded 484 bps to 19.5% while Pantaloons operating margin grew 275 bps to 10.4% led by lower discounting and significant store rationalisation.

Adjusted loss stood at c. Rs 2.7 billion due to increase in depreciation (+30.7% YoY) and high interest cost (+65.6% YoY) due to debt taken to fund the TCNS acquisition. Company closed net 29 Pantaloons stores and 60 Madura stores during the quarter.

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