Categories Research Summary

Arvind Fashion Ltd Continues to Thrive in the Fashion Industry with Innovative Strategies and Growth Plans

“Our Q3 results reflect further infusion of energy into our business with strong portfolio of brands, delivering healthy results with 17% growth in NSV and nearly 30% growth in EBITDA. With sharp focus on execution and customer experience, business delivered 12% retail like-to-like sales growth and record sell through. Our aim continues to be on improving profitability further and deliver a higher ROCE from our business.” – Shailesh Chaturvedi, MD & CEO

Stock Data:

TickerNSE: ARVINDFASN & BSE: 542484
ExchangeNSE & BSE
Price Performance:
Last 5 Days+4.72%
Last 12 Months-1.05%

Company Description:

Arvind Fashions Limited is an Indian company that markets branded apparel under various national and international brands such as US Polo Assn, Flying Machine, Arrow, Calvin Klein, Tommy Hilfiger, Unlimited, and Sephora. The company primarily operates in apparel, beauty products, and footwear space and has its headquarters in Ahmedabad, Gujarat, and warehouses in Bengaluru, New Delhi, Mumbai, and Kolkata. Arvind Fashions Limited has expertise in scaling up brands through multi-channel distribution and aspires to become India’s leading lifestyle company in the post-pandemic era. In 2020, it floated two rights for the issue of equity shares to raise working capital and expanded its business domain from retail distribution to online services. The company has two wholly-owned subsidiaries—Arvind Lifestyle Brands Ltd. and Arvind Beauty Brands Pvt. Ltd.

Critical Success Factors:

  • Power brands such as USPA, Arrow, and Calvin Klein are major growth drivers. USPA achieved a milestone of NSV 1,500+ Cr in YTD Jan’23 through strong retail LTL and high growth in department stores, resulting in a significant reduction in discounting. Arrow continued its double-digit LTL and positive EBITDA for three consecutive quarters and started the Super premiumization of the brand through the ‘Arrow 1851’ line, which will further boost growth. Calvin Klein maintains its market leadership of the bridge to luxury segment in jeans, Tees, and innerwear segments with strong traction in the super premium category, aiding the brand’s robust performance with industry-leading full price sell-thru, retail LTL, and lower discounting.
  • Arvind Fashions Limited (AFL) has demonstrated excellent execution capabilities on retail experience through investment in brand building and healthy channel mix, leading to operating leverage and increased Gross margins (+160 bps). The company aims to expand in adjacent categories such as footwear, kids wear, and Denim category, which are fast-growing segments (50% sales growth). AFL is further investing in creating an omnichannel model with higher contribution in D2C, strengthening the online as well as offline channel, which will drive customer loyalty.
  • Arvind Fashions Limited, reported its Q3FY23 results, which saw a 17% YoY increase in revenue to Rs 1,179 crore. The company attributed the increase to industry-leading retail LTL and growth in department store channels. Power brands saw revenue growth of 18%, leading to strong improvement in EBITDA margins of approximately 140 bps. The company’s footwear and kids wear businesses registered a 45% YoY growth, while gross margin expansion of 160 bps was driven by industry-leading full price sell-through for AW’22. The company’s EBITDA margin was higher by 110 bps due to improvement in gross margins and operating leverage, with EBITDA increasing to Rs 136 crores (vs Rs 106 crores in Q3 FY22), reflecting a growth of 29%. The company also sustained ROCE (annualized) at around 15% in Q3FY23.

Key Challenges:

  • Arvind Fashions Limited faces a number of risks and concerns that could impact its growth prospects and financial performance. One key risk is the intense competition in the retail industry, both from traditional brick-and-mortar stores as well as from online platforms. This competition could lead to pricing pressures, reduced margins, and loss of market share for Arvind Fashions Limited. Additionally, the company’s growth strategy depends on expanding into adjacent categories such as footwear and kids wear, which are highly competitive and could be subject to changing consumer preferences and trends. If Arvind Fashions Limited is not able to execute its expansion plans effectively or faces greater competition than anticipated, it may struggle to maintain its growth trajectory.
  • Another risk for Arvind Fashions Limited is the potential impact of external factors such as economic downturns or disruptions in the supply chain. The COVID-19 pandemic, for example, has had a significant impact on the retail industry, causing disruptions in the supply chain and reducing consumer spending. While Arvind Fashions Limited has demonstrated resilience in the face of these challenges, continued disruptions or economic downturns could negatively impact the company’s financial performance. Furthermore, the company’s reliance on a few key power brands such as U.S. Polo Assn. and Calvin Klein could also be a concern, as any decline in the popularity or performance of these brands could have a significant impact on Arvind Fashions Limited’s revenues and profitability. Overall, Arvind Fashions Limited will need to carefully navigate these risks and concerns in order to maintain its growth trajectory and remain competitive in the retail industry.

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