ARVIND FASHIONS LTD (NSE: ARVINDFASN) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Ankit Arora — Head, Investor Relations
Kulin Lalbhai — Vice Chairman and Non-Executive Director
Shailesh Chaturvedi — Managing Director and Chief Executive Officer
Girdhar Kumar Chitlangia — Chief Financial Officer
Analysts:
Priyank Chheda — Analyst
Prolin Nandu — Analyst
Sachin Kasera — Analyst
Avinash Karumanchi — Analyst
Naysar Parikh — Analyst
Rishikesh Oza — Analyst
Shreyansh Jain — Analyst
Abhijeet Kundu — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Arvind Fashions Limited Q3 FY ’25 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 concludes. Should you need assistance of this during the conference call, please signal an operator by pressing start and zero on touchstone phone. I now hand the conference over to Mr Ankit Arora, Head of Investor Relations and Treasury. Thank you, and over to you, sir.
Ankit Arora — Head, Investor Relations
Thank you. Thanks,. Hello. Welcome, everyone, and thank you for joining us on Urban Fashions Limited earnings conference call for the 3rd-quarter and nine months ended, 31 December 2024. I’m joined here today by Kulin Lalbai, Vice-Chairman and Non-Executive Director; Shalesh, our Managing Director and CEO; and Girdar, our Chief Financial Officer. Please note that results press release and earnings presentation had been mailed across to you yesterday and these are also now available on our website, www.arvinfashions.com. I hope you had the opportunity to browse through the highlights of the performance. We’ll commence the call today with Kulin providing his key strategic thoughts on our third quarter’s performance. Post that, we will have, who will cover the details of business highlights and financial performance. At the end-of-the management discussion, we will have a Q&A session. Before we start, I would like to remind you that some of the statements made or discussed on this call today may be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face. A detailed statement of these risks is available in this quarter’s earnings presentation as well. The company does not undertake to update these forward-looking statements publicly. With that said, I would now turn the call over to Kulin to share his views. Thank you, and over to you,.
Kulin Lalbhai — Vice Chairman and Non-Executive Director
Thanks, Ankit. A very good afternoon to you all. Thank you for joining us for the Q3 results. EFF delivered yet another quarter of strong performance in muted market conditions. Our sales grew by around 7%, led by strong like-to-like growth of 11%, helping us deliver our highest-ever EBITDA of INR174 crores with an improvement of more than 110 basis-points in margin terms and thus aiding a 71% growth in our PAT. Our bottom-line has more than doubled in the YTD period. Our focused interventions like higher advertising, increased square-foot expansion, superior customer experience and product innovation, coupled with celebrity collab collections have led to an acceleration of our retail channel growth every quarter this year. We had around 15% growth in the retail channel in-quarter three. This is a clear reflection of our brand strength with our consumers, which has helped us gain market-share in the industry. We continue to maintain tight control over the balance sheet KPIs with our gross working capital days remaining stable. As a result of this, another highlight this quarter is a strong improvement in our return on capital employed, which has now crossed 19%, a significant shift in the last two years. This gives us confidence to now take it beyond 20% in the medium-term, a target which we had set for us last year. Moving ahead with our season 25 launch, we remain optimistic of growth momentum compared to the quarter three levels, while continuing to stay committed to our mantra of profitable growth. I would like to now hand it over to Shailesh to take us through the specifics and more details about our financial performance.
Shailesh Chaturvedi — Managing Director and Chief Executive Officer
Thank you, Colleen. Good afternoon,, Ankit and everyone on this call. With NSV of INR1,203 crores and EBITDA of INR174 crores, in Q3, AFL has registered revenue of INR3,431 in nine months of FY ’25, indicating a growth of 8.5% in this year. With EBITDA only value of INR467 crore YTD, the EBITDA growth in this year is nearly 18%. The revenue growth in Q3 is 7% and EBITDA growth in Q3 is 16%. Q2 — Q3 started with Diwali business and above-average Diwali, which was followed by very good trading in both wedding season and in winter season. There was bunching of wedding towards winter and we saw good trading. With early setting of winter by-10 to 12 days this year, we saw higher full-price business of winterwear in November and December. We registered the tempetition of participating in early USS with industry and with overall controls and better market condition and better execution, our discounting reduced by 1%. With lower discounting and richer channel mix in favor of direct channels, retail and online B2C, Q3 GP went up by 160 basis-points to 55%. The GP number for YTD is 53.3%, an increase of nearly 800 basis-points to be precise 80 basis-point with improvement in GP flowing into EBITDA, backed by tight expense control, but higher marketing investment, the EBITDA in Q3 grew by 110 basis-points and reached 14.5% of NSV in Q3. This quarterly EBITDA of INR174 crore is the highest-ever quarterly EBITDA for AFL. Double-digit like-to-like retail growth in Q3 at 11% is a key highlight of this quarter and is a reflection of the strength of our brand portfolio. This double-digit like-to-like growth is spread across brands and it is really heartening to note that all five brands have been reenergized even in these muted market conditions and have delivered healthy performances. While we have continued to execute our retail promise with better-quality shopping experience through knowledge transform from international standards, I want to focus on marketing investments. In this year, we have continued to up the marketing to have a sharper visibility for our brands under muted market condition. Let me focus on marketing investment through local celebrities. Very rarely will you come across a portfolio where we have three of the most iconic brand embarrassor tie-ups happening in the industry at the same time. We invested concurrently in Desha Patni for Calvin Klein, Maharaja Singh, Pacho for US Pool Association and we had the most iconic tie-up with Flying machine, which took our Gen Z consumers by storm. Another important aspect of these tie-ups was launch of one of its kind collections where our brands work with these important celebrities to create very differentiated upgraded capsule collection to fuel our premiumization drive. Both Collection for Flying Machine and Maharaja Pacho Collection with US Pool Association were big hits and we will continue to roll-out more collections in these lines. With these upgraded offerings, we got very good response from consumers and were able to reduce discounting. We also saw a healthy discount reduction in our direct B2C online business, which also saw a very good traction due to these heightened marketing investments. In FY ’25, we have taken decisive strides in-building a strong momentum of highly profitable growth with our direct channels, which include branch stores, websites and online B2C marketplace business. There is a nearly a 4% increase in the share of revenue mix for direct channels and their share has reached nearly 55% this year. This is in-line with our medium-term vision of taking this number to maybe two-third of our business. There is a healthy acceleration of growth in retail channel quarter-on-quarter and the growth has moved up from single-digit in Q1 to now very healthy mid-teen level. The support engines for retail of like-to-like growth, square-foot addition and renovations of stores have reached a momentum where this mid-teen growth of retail is very likely to sustain and may even improve further. Similar in the case of large growth in B2C online channel where there is a large pivot away from wholesale B2B. Another hardening development is significant improvement in margin profile of these direct channels, helping our mantra of profitable growth. The margin profile has improved because of higher GPA in-direct channels and continued control on discounting through our sharper execution. We are very sure that growth engines on direct channel will continue to fire going-forward. While the underlying growth in wholesale channel is in the range of 8% to 10% growth, we have seen a quarterly moderation currently, partly due to exit from some department store formats and destocking in muted market condition as per our hygiene. There is also impact of higher billing in Q2 because of early festival calendar this year. While we want to strategically descal B2B online wholesale channel, the other wholesale channels are likely to get back to underlying growth potential of 8% to 10% growth in the near-term even in this sluggish market. There’s a lot of juice in square-foot expansion in many of our formats. Premiumization is working well and adjacent categories are growing well with both MBO and department store channels. Recent tax cuts announced in the budget are also likely to spur demand in these channels where distribution goes very deep and we are very hopeful of this wholesale business moving back to its underlying potential. Coming to growth drivers, retail channel has grown well at 15%, backed by both growth drivers of double-digit like-to-like growth as well as healthy square-foot expansion. Adjacent categories have continued to grow at faster pace with doubling of business in women’s wear and mid-teen growth in innerwear. Footwear growth has got impacted because of BIS implementation, which has impacted inventory levels and assortment. Business is a very large growth opportunity and we are piloting new ways of growing this piece and we are likely to see strong traction ahead in this business. Coming to online business growth engine, we have discussed a strategic pivot towards online B2C channel in order to better manage consumer experience and control discounting. With this focus, B2C channel is growing handsomely. The growth in B2C will more than compensate any likely decline in B2B and overall online business is likely to grow close to 10% profitability with a healthy revenue mix of around 25%. We’ve also engineered sharp cost management in online business and our channel margin profile is seeing very good improvement here. On-brand side, USPA business has very strong momentum and with very special investment put behind this marquee brand. Both Aero and Flying machine have improved their profitability profile further through double-digit like-to-like retail growth. The premium portfolio of Tom Hilfiger and Calvin Klein is leading our premiumization drive with significantly higher-growth in teens and the best-in-class profitability. We continued our sharp focus on-balance sheet deleverage, ensuring tight control on working capital and Q2 saw — Q3 saw further five-day reduction in inventory versus last year. With inventory value coming down by nearly INR40 crores over the September ’24 number, inventory stock turns was more than 4 turns. Debtor value also came down sharply by nearly INR180 crores post festival trading and NWC days remain at healthy 60 days. 80% EBITDA growth YTD this year is flowing into PBD growth of 44% and PAT growth of 133% for continuing businesses. We are seeing good FOCF generation at AFL and with our asset-light model and very tight balance sheet control, we are hopeful of an acceleration in FOCL generation. With the recent tax cuts announced in the budget, we are hopeful that there will be positive economic indicators helping business to grow well. In the medium-term, with good priming of all growth engines, we hope to up the growth rates the way we have done in FY ’25 compared to growth in FY ’24. Our aspiration for 12% to 15% revenue growth stays and we are hopeful that improved consumption scenario with recent tax cuts will aid our efforts.
Ankit Arora — Head, Investor Relations
Thanks,., we can now open it up for question-and-answer session.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the 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 the first question is from the line of Priyang Chheda from Capital. Please go-ahead.
Priyank Chheda
Yeah, hi, team. Solid set of performance and congratulations team for the great numbers., my question is on the online B2C versus a total channel growth of online and others. So there has been a divergence. I mean, and we have been witnessing that for now last 3/4. So when do you think that the transition within online, which is towards B2C, you think that will get completed and the whole channel should grow as in-line with online B2C channel growth?
Shailesh Chaturvedi
Hi, Mr Sheda Shalesh here. We’ve been talking about, you know, pivoting away from B2B to B2C to better manage the consumer experience, better assortment, online exclusive, use of analytics, better, lesser discounting and more controlled discounting. So that’s the plan. And if you really look at this journey, which peaked in COVID times and then after that, the correction happened and then now the business has started to grow. So we have seen that our online business has started crossing the pre-COVID peaks and now started growing healthily. And we are very strategically continue to decline our B2B channel and it may decline by 10% to 12%, which is a planned decline. But the B2C growth now this quarter the growth was 20% and the B2C growth was 20% and it will continue to gain the share of overall online piece and we are now seeing that online business will grow more than 10%. And that’s why the whole transition from B2B towards a higher-growth of B2C has started and now reaching a point where any decline of B2BC is able to be compensated easily by B2C growth and overall online piece has started to grow. And it will — like I said in my opening remarks, we hope that in the near-future, it will grow at around 10%.
Priyank Chheda
Right. So what would have been this mix now reached where we would be what share within B2C — within online, what would be B2B and B2C share now?
Shailesh Chaturvedi
You know, it was almost you know it was almost you know 50/50 it was almost 50-50 and now see I’ll just give you a little bit of a background where in the COVID times, if I look at the data, it was largely B2B business. The storage pivot has happened in the last six to nine months, the B2B and B2C business were equal. And now we are seeing that B2C is going to become larger than B2B and it will be able to take-away any decline of 10% to 12% in a business decline in B2B and with this higher-growth. This year growth in this quarter is 20%, but if I look at the annual number, the growth is even higher. So that 10-odd percent decline in B2B, a higher 20% 25% growth in B2C will be able to compensate more because both are now more or less equal. And if I look at the next six months, B2C will be bigger business, maybe two-third and B2B will become one-third.
Priyank Chheda
Very clear. Perfect. My second question on this — on the wholesale, which you alluded that you exceeded — exited some large department store was it this quarter or is that been a gradual exit that we should read when it comes to nine months, yeah.
Shailesh Chaturvedi
See, there was a — one partner decided to shut-down the format. We didn’t exit a very large chain both in the value format and in the premium format. I don’t want to take the name here, but they decided to shut-down and this happened almost a year back then, but the four quarters of the business, we in a short decline because we had the past data. But as we go-forward, that impact will not be there in our sales figures.
Priyank Chheda
Perfect. So the broader question that I was asking was on the wholesale as a channel. If you have to of course, exclude this one-off, what would have been the growth and would — and has that been reflected in when it comes to the sales of a brand level which is Aero, which has a higher salience in this channel.
Shailesh Chaturvedi
See, if I look at — and if you look at my opening commentary on wholesale that we believe the inherent underlying growth potential in the near-term is 8% to 10%. Now if I break it down into, let’s say, three parts. One is the online B2B, other is the department store and third is in terms of the MBO channel. Now if you look at B2B, there is a strategic destocking, we want to pivot away and the B2C will start growing faster and we’ll be able to absorb that decline and will grow online that I just mentioned earlier. Second point is in the department store channel, again, here the one-off impact of closure of one big chain is not our decision, the chain decided to shut-down. It impacted the whole industry. Also the Q2 billing because Diwali was earlier were little higher. So it’s a one-off thing. But if I look at the consumer sales in department store, if I look at what we call tertiary sales, the like-to-like growth in that channel is very similar to our retail growth of double-digits. So it’s not that the channel is not performing and I also mentioned that recent tax cut might help the wholesale channel a lot because the distribution goes very deep. So in department store, our consumer sales are good, healthy, our market-share, our rank is improving and it’s very we are a leader in that channel. So it will continue to grow. Markets will become slightly better than our growth will be there and I’m very confident that in the near-future, the department store will grow at the inherent underlying growth potential of 8% to 10%. And comes the third is the MBO channel. Again, some of the reasons of early billing, et-cetera, it’s a very important channel. It’s been a growing channel. And I also believe lot of our square-foot expansion is ahead in our brand like Flying Machine, Arrow, adjacents category, kids. There is a lot of scope of further expanding square footage with the NBO channel and we are in a market-leader in MBO channel also very good performance, overall numbers, clearly market-leading position in MBO channel. So that business also will grow at 8% to 10% in near-term. Other than B2B, where-is the planned destocking, both the other wholesale channel will — should grow immediately at 8% to 10% in near-future.
Priyank Chheda
Very clear. Just last question from my side. On the flying machine, you have clearly mentioned and very heartening to know that delivered — it delivered a strong retail like-to-like growth. And when I have to also read-through Aero, we have been focusing on accelerating EVOs. So now on both this brand combined, now is that the core focus which when it comes to only B2C or because these brands were heavy on B2B as well at least Aero, is the game plan around completely focusing on B2C and then non-focusing B2B when it comes to these two brands?
Shailesh Chaturvedi
See, as far as both the brands are concerned, both the brand Arrow and Flying Machine have delivered double-digit like-to-like growth in this quarter and in this market and they’re gaining market-share in key department store and other portals. So we are very happy with the progress both in Arrow and Flying Machine. Now coming to the channel preferences, I just mentioned that I see scope of expanding square footage in MBO channel and department store further for both Arrow and FM. So we will — Arrow is little subscale right now in terms of distribution. So not just MBO or the department store, also EBO. We see possibility of a larger square-foot addition across the channel in, export, be it MBOB, department store and surely in EBO channel. And at the company-level, we will focus a lot on direct channel and we see the reason we are very competitive in execution of that channel, GPs are better, overall growth is very healthy. So Aero and FM will benefit from that direct drive and B2C and EVO, but both FM and are so you know under distributed in many ways, subscale in many ways that we will not lose sight of further expansion in wholesale with MBO and with department store for machine and flying machine also the doors open for some value department store and we are doing very good numbers with the value department stores. So there is even more opportunity for square footage in — for flying machine as well. So I’m not saying that we will not — we will deemphasized. We will put all our hearts and put large square-foot addition across the channel for flying machine and arrow.
Priyank Chheda
Wonderful. Thank you.
Operator
Thank you. The next question is from the line of from Public Alternators. Please go-ahead.
Prolin Nandu
Yeah. Hi, Kulin and. Thank you for taking my question. Quite heartening to see 11% LFL growth. So congratulations on that. So I just want to summarize, right, like your opening comments as well as what you probably answered and correct me if I’m wrong, it seems like as we enter, let’s say, Q4 or FY ’26, we have a very balanced approach in terms of our channel and also in terms of our brand, right, where all the guns are firing, correct me if I’m wrong, this 11% retail growth was contributed. I mean, there was a double-digit growth across all your brands, right, with Flying Machine and Aero also kind of contributing to this growth. So my question is, you know, is it the correct assessment that as we enter ’26, both in terms of brands and channels, the overall LFL growth or this 8% to 10% growth that you have mentioned is going to be very balanced across channels, across the brands. And what will that what will that do to our margins, right, because and Flying machine, if I’m not wrong, were dragging the margins overall company-level margins. So is it fair that, that drag will no longer be there as we enter ’26?
Shailesh Chaturvedi
You know, if I take one-by-one question on like-to-like growth, you’re right. The like-to-like growth in retail of 11% is across the brands. All brands have grown double-digit. If I look at the department store, consumer business tertiary, they are good growth across our brands. So that’s true. Now the focus on like-to-like, if I look at our guidance, we are guiding that we are looking at around 5% to 7% like-to-like in-full price growth. If I look at the full-year number, our like-to-like growth, while in this quarter is a bumper 11%, but at a full-year level, the like-to-like growth is between 6% to 7%, which is slightly higher than our guidance. So we are doing well. Our marketing efforts, our execution, our product lines, quality improvement is all working well for us. Now what happens to the margin? So we are expecting that our EBITDA — our guidance is that it will continue to grow by at least 100 basis-points going-forward. This year also, if you really look at, we have grown our EBITDA by 18% and by 110 basis-point YTD this year and we hope that we will continue to — our guidance is that we’ll continue to grow our EBITDA by at least 100 basis-points. And as you rightly said, the contribution of Flying Machine and will have to be higher. So if the overall company has to grow at 100 basis-points, the arrow and flying machine growth with EBITDA growth has to be higher than 100 basis-points. That’s what our plan is because there is a scope to take that forward, it takes time. The work is in-progress. We are very, very happy with the progress in Q3 and how the Arrow and flying machine have delivered in Q3. That journey will continue to grow EBITDA by 100 basis-points and large part of that gain will come from GP where control on discounting, sourcing efficiency, our control on and also the scale leverages. And especially in Arrow and flying machine, we expect the scale leverage to be higher than the overall company because there is a scope — there is a chance to improve the scale faster in Arrow and FM. So we will benefit from GP increase and economies of the scale, leverage and control on expenses. So we will definitely believe that we’ll be able to grow our margin by 100 basis-points and with higher than that number for aero and flying machine.
Prolin Nandu
Sure. And just on aero and flying machine, right? Do you still stick to your earlier guidance that maybe flying machine in terms of recovery is, let’s say, a year or so away from arrow or has this — the marketing activity that you did with Ori helped you to you know, lessen that gap versus arrow in terms of recovery. Could you let me know where are both of these brands in terms of their recovery trajectory?
Shailesh Chaturvedi
I know both the brands are on way. They are on-track, on our plans. Arrow is ahead and even with the Ori big success that we saw, Arrow will continue to have that edge because the effort started earlier. FM, we have done a very large rebranding exercise from the logo to the new retail identity to the new product direction, new brand association. So it’s early days. We’re very, very pleased with the early success, the green shoot we have seen. But everything takes time and our aspirations are very-high. The standards that we want to establish are very, very-high. So it takes time, but we are very, very pleased with the current journey of both Arrow and FM in terms of revitalizing these brands and making them profitable in a healthy way.
Prolin Nandu
Sure. And one last question would be on your retail expansion plan, right, in terms of EBOs going-forward. Now here also we did some changes, right, that we were opening much larger stores in some of our — let’s say for US polos, right, because the assortment and accessories and all require bigger space. So now that we enter ’26, how do you see the square-foot addition, addition right for our retail space in FY ’26.
Shailesh Chaturvedi
So our guidance on square-foot expansion is around 15% net addition. You know, we are at around 1.15 million-square-foot as on-date and we believe that we will — our guidance is to grow that at a 15% — so around lakh and half net square-foot addition every year. Our store count can change because we are — we as you mentioned rightly that our store sizes are becoming larger. Consumers are voting in favor of larger consumer stores with better shopping experience. Some of our formats like Club A or US Polo family stores have a very large footprint. So we will chase that square-foot of 15% and that’s what we are working on. We have done a lot of hard work-in the market to build muscles for business development. We have teams in the market that whole org is being developed as we speak and we are happy with the progress. And we are also happy with the quality of execution of our stores. The new stores are tracking good numbers. They are on plan and we are very happy with the way the shopping experience is emerging from these new stores.
Prolin Nandu
Great. All the best team. I’ll come back-in the queue if I have more questions, but thank you so much.
Shailesh Chaturvedi
Thank you,.
Operator
Thank you. Ladies and gentlemen, to ask a question, you may press start and one now. The next question is from the line of Sachin from Swan Investment Managers. Please go-ahead.
Sachin Kasera
Yeah, hi, Sanesh. Can you update us with the progress? Hi. Can you give us the progress on the footwear business in the first-nine months and also some of the emerging segments like the women wear and the kidswear in US Polo and also the Club A that we launched, how is the progress there and what are the plans there going ahead?
Shailesh Chaturvedi
Yeah. Let’s start with the footwear. You know, footwear is a large business for us. And we are looking at a strong leadership. We do large business in profitable double-digit EBITDA business in US polo footwear. Now because of the government regulation, what’s called BIS, the import of import of footwear, it came to a standstill for a moment and it impacted the inventory levels and the assortment. So in some of our big brands like US Polo and in Tommy, we saw a sharp decline on business, but that’s behind us frankly, Sachin, now government has made a lot of progress. There is again I’m using the word green shoot because sub of the factories are now coming up, they’re getting approved and also there is a larger production happening in India. So I would say the worst is behind us. Maybe in three months from now, I would be a little more optimistic with little more data because it’s happening as we speak. So things are looking up. But if I look at the last six-month data, nine monthly data, we did lose a business in footwear because of the lack of inventory, you know there. But things are looking up. We also have a retail concept and called Stride where the overall like-to-like growth is double-digit. It had a low-single digit because of the inventory situation, but it will come back. And inherently our business is so strong and some of the categories like sneakers go so well with our brand like US Polo and we sell very large millions of pieces of our sneakers in US polo leaders in hotel online and also very large share of revenue of our store comes from the footwear business. So it’s a very healthy business having temporarily external headwinds, but that’s behind us and I think things will only look up in six months’ time it should be green again. As far as the other agencies are concerned, I mentioned in my opening comment that women’s wear has doubled on a small base and it has done quarter-by-quarter. So that business looks very, very promising. Both independently business on online, also within our own family stores. And also we started expanding — expansion into MBO channel with dedicated women’s wealth space. So lot of good things happening. We’re very, very happy with the progress. We tied-up with the celebrity Palak Tibari that association is going on well. So that business has — has taken off well and it’s moving well, quite good. Overall adjacents category at a company-level, the share is 20%. For US is even higher at around 25% and that business is growing between 15% to 20% much higher, almost double the growth rate of the company. So I think it’s looking good at that business. Kids is another large piece and we see huge opportunity to build that. We are piloting something on US Polo Kit Store, the format, the product lines and you’ll see us come out. It’s already a very strong business. We are leader in that space and you will see a little more traction in the kids business going-forward. So overall, adjacents category are driving the growth. And innerwear also in US polo, we have a good business and you know the growth has come back very strongly through online business, through business in our stores and that business is growing again in mid-teens, as I said in my opening comments and growing with better margin profile. So overall, adjacent categories are helping us the company grow faster and the share is improving and growth rates are very good in this category.
Sachin Kasera
So when you say 20%, it includes footwear, women wear, kidswear and dinnerwear all put together or that’s only the women wear that you?
Shailesh Chaturvedi
No, no. All the business is put together.
Sachin Kasera
And any physical business.
Shailesh Chaturvedi
Is a very small-business right now, Sachy, it’s growing really well. The sell-throughs are extremely encouraging, but still it’s just a one year-old business.
Sachin Kasera
So the larger share would be the put that emerging when you say 20%.
Shailesh Chaturvedi
Yeah. So the — in terms of scale, it will be footwear, kidswear, inner wear and women’s wear?
Sachin Kasera
Sure. And any sense like what was the decline in footwear like more like 15% 20% in the first-nine months?
Shailesh Chaturvedi
No, the — see, there is a growth in footwear business. It’s in the high-single-digit, but this business, we have NGI for growing at more than 20%, right? So from the worst days now on that smaller reduced base is growing now high-single-digit and — but we are not happy with the high single business to grow at 20% minimum.
Sachin Kasera
Sure. And if you could update us on this Club A that we had launched, I think couple of quarters back, the large-format stores for the high-street for the service.
Shailesh Chaturvedi
We opened recently two large club one at the Lucknow Airport, very, very good almost 4,000 square-foot, absolutely top-quality in India, you will not find stores of that standard. We also open on the High Street in Surat. So now we have three club-A stores. And as we speak, two are under fit house and we have been still modeling, adding brands, removing brands, figuring out the right model to expand. But this has a huge opportunity, but we want to just do the modeling right and then expand.
Sachin Kasera
Sure. My second question is on the margins ex of PVH. From whatever math we can do, I think it looks like we have around 1% net margin ex of the PVH business. And from whatever various interests, most of the brands are now either high-single-digit or double-digit EBITDA margins. So it’s not flowing through in the PAT margin. So if you could give us some sense on why despite having high-single-digit and double-digit margin at the brand level ex PVH, the net margin is only 1.2%.
Ankit Arora
So Sachy and Ankit here. So your observation is right, but if you really step-back and look, see, it’s a journey, which is what one would need to kind of understand and largely the drag was coming — since you’re talking about the bottom-line was coming from Aero and FM, but very, very heartening and I’ll put some data for everyone’s reference, what you’re referring to. If you step-back and look even in this quarter and the last quarter, our PAT, excluding minority interest, we have clocked close to about INR30 crore PAT, which implies a more annualized run-rate of north of INR100 crores in some sense, if I were to kind of really take that. We did INR28 crores in this quarter and about INR30 crores last quarter. Even in YTD, if you step-back and look, excluding minority interest, our bottom-line has more than doubled, it’s grown at north of 130%. So yes, what you are saying is still about close to about 1.5%, 2% PAT margin in that ballpark range going up. This quarter like say we did PAT, excluding minority about close to north of 2%, which is on a INR1,200 crore, did about INR28 crores. So yes, the journey is to increase the bottom-line and as what Shalesh has spoke about at length earlier in previous participants’ answers as well is as aero and machine continue to kind of inch up and the kind of performance, which is what we have witnessed in Q3 very, very heartening, this number will accelerate only going-forward and we have demonstrated that over the last four to six quarters already and this number is only going to accelerate further as we step into FY ’26 and ’27 and you will see that continuously happening quarter-on-quarter, year-by-year performance.
Sachin Kasera
Sure. My last question is around the five power brands. If you could just give a sense in terms of first-nine months in terms of hierarchy, the growth pattern like which was the highest-growth, which was the second-highest, something like that.
Shailesh Chaturvedi
Sachin, the — we don’t share the brand-wise details, but you know, I think if I look at whether it’s like-to-like data growth, both — all the brands have done well, Sachin. I think the — what differentiated are the channels and the direct channels have grown faster than wholesale channel and across the brand. But overall, if I look at the brand profile, all brands have grown profitability and in a healthy manner.
Sachin Kasera
So if without sharing the percentage, if you could just give us a sense like which brands grew more than company average, which grew, at least give us some sense of that would be helpful. We are not looking at some specific number like 10% or 12% or 8%.
Shailesh Chaturvedi
I mean, but just in my opening commentary, I said that the PVH profile, the higher 1 teen growth with very highly profitable and premiumization helping them the market leaders there. So that piece is growing faster and it continues to grow at a slightly a higher — maybe significantly higher pace than the overall average, but all brands have done well. I mean, you look at US as such good momentum, you go see the traction of US across channels doing so well, Arrow FM have improved their performance. So some channels are not growing or growing, but at a brand level, I think all brands have been reenergized.
Ankit Arora
And Sachin, just to kind of just add a color what just Sheilish said. I mean, see, look at a percentage right. I mean while a brand might be slightly smaller than scale may grow at a.
Operator
Now invite the next question, which is from the line of Avidash from Equirus. Please go-ahead.
Avinash Karumanchi
Thank you, sir. Good afternoon. So I’m just trying to get a better view on the inventory. So this inventory optimization that’s happening, right? I’m just trying to identify how much of this would be at the store and how much would be an e-warehouse. So where exactly are we having a better kind of reducing?
Ankit Arora
So Avinash, all the inventory when we — what you are looking at it is all on our books and we have moved to our consignment business model in EBOs, which is what we have discussed in the past. So it’s all the inventory which is lying on our books and we don’t really segregate because it will be in multiple channels. We don’t really segregate between which is lying in EBO and what will be in warehouse.
Girdhar Kumar Chitlangia
And the actions — I — the actions generally impact across all locations. I mean, while we try and say that we want to optimize a few channels, but actions generally impact most of the locations uniformly.
Avinash Karumanchi
Okay. I’m just trying to identify like what would be the inventory turns channel-wise. So like optimization when you are speaking, so I don’t need an exact number, but I just need like a view, like how would the inventory turns in the EVOs be or the online channel be because they contribute for the majority of the inventory, right? Rest of them is cash-and-carry. So that’s how I’m trying to look at.
Shailesh Chaturvedi
But you know, if you look at our inventory turns in the last five odd years we moved from early three times.
Operator
Are we are unable to hear you hello.
Avinash Karumanchi
Am I audible? I’m unable to hear anything from the management.
Operator
Please give me a moment, let me check the line for the management.
Shailesh Chaturvedi
Across the channel, you know, we have been able to move our inventory. And if I look at our aging of inventory, I look at the share of freshness in our business, it’s good. And that’s one of the reason why GP is going up really well because we have a very large freshness and where we don’t need to discount and our sell-throughs are very good across channels. So overall, that’s why the inventory turns have really gone up from 3 odd now to 4.2%. If you look at last one year, our growth with have been more or less with the same inventory value and we’ve been growing now this year at 8.5%, but if you look at increase in the value of inventory is very, very small. So we’ve been able to grow business at a certain pace, high-single-digit with more or less the same inventory value.
Avinash Karumanchi
Got it, got it, sir. And one more question is on the store front. So the number of EBOs — while gross margin was higher, the netrition was not significantly there. So in which brand are we seeing more-and-more closures coming in?
Shailesh Chaturvedi
No, I mean, see, what happened is that we had very large four malls coming up with large square-foot, which would have added in October before Diwali, but the malls got delayed and now it’s going to happen in April, May. So that’s the reason. But if you really look at you know the total cross addition of square footage, I mean, this year is more than lakh and half. We’ve never grown — we have never opened so many stores in a year. So that you know large expansion is happening. We also had to shut some stores. It’s a part of life, but because of the delay in the mall, the number looks nice. Also, I think we are the fag end of that closure now whatever we needed to close, most of those stores have been shut-down. Basically, it’s not a brand level, it’s more often the format, the smaller size in some types of markets, they become loss-making or not strategic where we want to open large stores with car park where the consumer get better experience. So we are shutting down smaller formats in certain kind of markets across brand. Some of the outlets we move from single-brand, small outlet to our big-sized format 4,000, which are economies are much better, shopping experience is much better. So it’s not so much the number of stores, but we’re also focusing largely on the square-foot and we are cutting down small loss-making stores and opening very large high-quality, profitable stores.
Avinash Karumanchi
Okay. Okay. Got it, sir. That’s it from my end. Thank you.
Operator
Thank you. The next question is from the line of Naisal Parik from Native Capital. Please go-ahead.
Naysar Parikh
Hello. Yeah, hi. First question on retail. For a 11% LDL growth, what’s the volume price? Can you talk about that?
Shailesh Chaturvedi
See, the bulk of the like-to-like growth has come from the volume growth. Majority.
Naysar Parikh
Okay. And on you spoke about this earlier, but on arrow and flying machines, when we look at FY ’26, from a profitability perspective, can we expect them to be PAT positive or how should we think about it? And secondly, are all the drags with regard to some of your royalties, et-cetera for the earlier brands? Is that out or is there anything still there in the financials?
Shailesh Chaturvedi
See as far as the second part of your question, disconned brand, there is no impact on the balance sheet on anyway. It’s all-out, it’s cleaned up. Now the business is the continued business of these five brands and their format that you know we work on. So like I said, Arrow and flying machine is a journey and they are growing at a faster pace in profitable — profitability and they are reaching a point where the drag is less. Now whether reach PAT positive soon, but that journey will happen. It’s a — that block of FM plus Arrow has to become PAT positive in the near to mid-term. Yes, and it will based on the market condition could happen six months earlier, sometime it could happen six months. But we are very, you know, happy and pleased with the progress on the improvement of the — and on the — this journey of profitable growth for both Arrow and Flying Machine.
Naysar Parikh
Okay. Got it. Thank you.
Operator
Thank you. The next question is from the line of Rishikesh from RoboCapital. Please go-ahead.
Rishikesh Oza
Yeah, hi, thank you for the opportunity. Sir, could you share what EBITDA margins are we doing for flying machine? For flying machines
Operator
Interrupt you, but your voice is not that clearly audible.
Rishikesh Oza
Just a minute. Is it okay now?
Operator
Yeah. Please go-ahead.
Rishikesh Oza
Okay. Sir, could you share what EBITDA margins are we doing for flying machine and aero? And also follow-up — follow-up on that, how do we see our PAT post minor — minority interest once you know our EBITDA margin scale-up for flying Machine and Aero? Currently blended terms there around 50% 58%. How do we see that going ahead?
Ankit Arora
So Rishikesh, to answer your first part of the question, we will not be able to disclose brand-wise profitability and PAT margins, that’s something which is what we don’t disclose. On pertaining to your second-half of your question, as to what I said earlier in response to one participant is, if you look at our journey on PAT excluding minority interest, it has been continuously going up and we expect that journey to significantly accelerate moving forward as to what you would have seen in YTD VTD period of FY ’25 as well where our PAT excluding minority has grown by north of 130% and it’s largely contributed by, of course, US gaining momentum and doing extremely well. That’s a very, very profitable brand. And of course, the drag on the bottom-line on account of Aero and Flying machine because of their intrinsic EBITDA profitability going up and hence the drag on PAT coming down and hence contributing to more bottom-line excluding the minority interest.
Rishikesh Oza
Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, to ask a question, you may press star and one. The next question is from the line of Shreyansh Jain from Swan Investments. Please go-ahead.
Shreyansh Jain
Can you hear me?
Shailesh Chaturvedi
Hi,.
Shreyansh Jain
Hi,. My first question is, if you could just explain, when I — when I look at your business, retail, wholesale and e-commerce, so when do we book the sales actually for retail, wholesale and e-commerce? I mean, I’m just trying to get a sense on how the working capital and our inventory would look like for each of the separate divisions.
Shailesh Chaturvedi
See, in retail channel, it’s an SOR model. So the — it’s a consignment model. So the sale get recognized on —
Girdhar Kumar Chitlangia
When the customer yeah. Ultimately when the customer buys, on the wholesale channel, it is all based on delivery or whatever the inco terms are, whether they are FOB or CIF. And on e-commerce, two-parts, the B2B is recognized based on delivery, depending on the terms with the partner and on B2C whenever the end-consumer sale happens.
Shreyansh Jain
So sir, in retail for both EBO, which is Coco and FOFO, a sale would get actually booked when the actual sale happens to the customer, right?
Girdhar Kumar Chitlangia
Yes.
Shailesh Chaturvedi
Correct.
Girdhar Kumar Chitlangia
Yes.
Shreyansh Jain
So sir, when I’m looking at your working capital, then we see some increase in your inventory levels and that is about 5.5 on — this I’m saying nine months basis. So nine months basis, there is an increase in inventory says about 5%, 5.5% and nine months your retail has increased the most, right? So technically your inventory and your receivables shouldn’t increase that much, right? Receivables more so, right, 17% increase in receivables, that should not increase ideally because that’s more cash-and-carry, right?
Girdhar Kumar Chitlangia
Yeah. So, yeah, the receivables largely — I’ll answer the question. The receivables largely have increased because we have had a change of model in some of our partners. We moved to what we call more controls based model where we have more visibility on the end inventory base. So that’s why you have seen there is an increase in receivables and there is a corresponding decrease in inventory. So net-net of GWC, these are neutral, and this is what is reflecting in the numbers.
Shreyansh Jain
Okay. Okay. And my second question is, sir, when I look at Slide number 8 — sorry, not 8. The brand where we’re saying emerging brands. Does that slide sir, make any sense right now because in effect, we’re putting the whole business top-line right there and then we’re saying EBITDA and PAT that actually is actually the P&L right in front of you, right? So I mean, what is the sense there? I mean, am I missing something or are we trying to indicate something via the slide?
Ankit Arora
So Shyanth, to maintain consistency, I agree to your point largely because now we are everything classifying as power brands, it’s just that because we had reclassified after our Sepura transaction last year and because the base was such and from a Y-o-Y comparison, that’s the reason which is what we have maintained that slide. But I understand where you’re coming from, we will probably in all likeness take-out that slide because everything is all fully revenue of all these five brands from Q1 of FY ’26, but we — just to ensure consistency with all of you as participants, we just wanted to kind of keep that slide because we have been doing that for last many quarters. That’s the only reason. But otherwise, I agree to your point.
Shreyansh Jain
And sir, just last question. So Aero, we understand we are on a journey and we are somewhere — somewhere near a positive trajectory in that journey. So just trying — because we’ve been tracking the company for some eight, 10 quarters now, but we’re still not able to get some sense on where — I mean, can you just quantify what was the loss that we were doing, at least what we were doing in the past? I don’t want to know where we are at currently, but what was the loss like exactly so that we know what kind of journey you’ve come through, right? So we will be able to better appreciate your journey. Thank you.
Ankit Arora
So, Shants, I will give you one very small data point in FY ’24 and then you can do rest of your calculations. The EBITDA change from FY ’23 to FY ’24 was as large as about INR70 crore INR75 crore. And that’s the amount of delta which is what we have really traversed in that in that entire arrow profitability journey and it is only going-forward there used to be a time during COVID where, of course, the brand was gotten hit the most given the environment conditions where we — of course, the brand became significantly subscale and of course, we started losing money at EBITDA level. But since then from FY ’24 onwards, when we have turned this brand around at EBITDA breakeven in a low-single digit and of course, it’s traveling towards its eventually journey of mid-single digit to-high single-digit on a pre-India basis that where-is what you are seeing the drag on profitability and on the bottom-line as well significantly getting better only on a quarter-on-quarter basis and it’s accelerating moving forward. Of course, you know, please understand and appreciate is the last two years have been significantly tougher when you look at revenues, right? I mean, there is something which is beyond a point you can’t do, it’s an external environment. And please keep in mind in FY ’24, our growth rates was about 4%, YTD is about 8.5%. So our aspiration of that 12% to 15%, once that happens, you will see that journey being covered at a far more brisker pace than what we have done. But all the levers and all the hard work is already in-place. The day you will see a significant green shoot acceleration on the growth, you will see that bottom-line improving even at a faster pace from current levels.
Shreyansh Jain
Okay. And sir, last question. So we’ve been guiding for 12% to 15% odd top-line growth. So I think this year it could be a challenge. But so do you still maintain 12% to 15% for ’26 and ’27 going ahead or you would want to revise that? How do you look at this?
Shailesh Chaturvedi
We are very committed to that our aspiration has not changed. We are gumming for 12% to 15% growth. We did slice it between the direct channel and wholesale channel that the — in wholesale channel also the underlying growth is 8% to 10%. The retail, which used to be a single-digit growth now, first-quarter the growth was 5%. Second-quarter the retail growth crossed 10%, it was 12%. Quarter three, that growth has now gone up to 15% and we believe that all the underlying growth drivers, enablers for that 15% growth on retail and also higher-growth in B2C will happen. The question is on the wholesale. And like I explained earlier in this call that we believe that with the recent tax cut, with improvement in business of the impact of closure of one big chain, all that going away, we will see the business immediately coming to 8% to 10% growth in wholesale channel and it will sort of move that path. Another way to slice the growth aspiration is to look at our growth drivers. And we have a very large number of growth drivers that we’ve kept trying. They’re all firing. So from like-to-like growth, which against a guidance of 5% to 7% this quarter we delivered industry beating 11%. We have a very large square-foot expansion, a target 15% CAGR and — but for a little bit of mall delay, but that engine is working really well and you’ll see large annualization and the growth will come from square-foot expansion. We also talking about adjacent category growth, the women’s wear, the kidswear, innerwear, footwear has taken a beating because of the BS, but once the inventory levels improve, that business is continue to grow at more than 20%. That’s about the adjacent category, digital focus. That piece is 25% of revenue and will now after this period shifting from B2B to B2C will continue to grow at 10%. So we believe that our platform is ready, our engines are firing, little bit of improvement in the market condition a bit and that pivot happening. I think we will continue — we will reach that 12% to 15%. Last year, our growth rate was 4.5% and we had guided that there will be a strong uptick. We have gone from 4.5% to now 8.5% this year, looks that level of high-single-digit, close to 10% growth and we are very sure that the growth will only go up as the economic indicators become more favorable.
Kulin Lalbhai
If I could just come in here in this whole growth discussion, I think one of the things that gets lost is quality of growth. And if you really step-back and see what the company has done is that we have stepped away from anything that could be low-quality growth. So the tail stores being shut-down meant square-foot addition had been low in the first-half as the second-half of last year. Similarly, non-performing SISS have been stepped away from. And similarly, discount led online growth has been stepped away from. So there was a very clear trade-off done that low-quality growth should be removed from the business model. And the good news is that those resets of stepping away from the low-quality growth are behind us. The square-foot engine has turned positive now for 3/4 and you’re seeing the growth rates coming. You’ve seen the B2C digital scale come back. And as Shailesh said, the wholesale also you will start seeing coming back to its underlying growth. So the reset phase is the low-quality reset is behind us. And we have seen the gain from it with a 20% almost ROCE coming into the business and very strong cash flows also beginning to come through in the business, the free-cash flows. But with the reset on the reset of bad quality growth times, you will see the overall growth trajectory of the business moving up and that’s what is the movement now towards that 12% to 15% band that we’ve talked about.
Shreyansh Jain
Well appreciated. Thank you so much and all the best.
Shailesh Chaturvedi
Thank you.
Operator
Thank you. The next question is from the line of Abhijit from Antique Stock Broking. Please go-ahead.
Abhijeet Kundu
Yeah, hi. Congrats on a great set of numbers.
Shailesh Chaturvedi
Thank you.
Abhijeet Kundu
My question was on, you know, how much of the growth or how much of the sales came from the end of season sales because you were one of the players, retailers who started of the season with a late end of season sales. Most of the fashion retailers have started their end-off season sales from mid of December. But yeah, the large permanent stores were still — they were — who will sell your product. They started-off from mid of December. So the case in point is, yeah, on one-side, you have — you have demonstrated that a better gross margin and a better EBITDA margin. So my question was that how much of it has come from the discount sales and how much has it come from the full-price sell-through.
Shailesh Chaturvedi
See, in Q3, yes, you rightly said, we delayed discounting and we didn’t go on USS with industry, we delayed it because our full-price sell-through was good, our like-to-like growth was good. So we didn’t see the need to blink and go early. We held it on Q3, there’s hardly any discounted sale-in this result that we have announced. That’s why our discounting is lower by 1% in retail, 2% in B2C. So we’ve been able to grow and like retail has grown at 15% and like-to-like double-digit across brand. And despite our hesitation to go or participate in end of season, we’ve grown well on all parameters, be it sales or be it profitability, the — our EOSS the journey is in January and we will announce those results when we announce the quarter-four results.
Abhijeet Kundu
Understood. So on a macro basis, how was the quarter? I mean for — because what we understood when we were preparing the preview was that when we spoke to most of the fashion retailers, they were pretty — you know, they were not very gung-ho about the quarter. They said that Q3 was a sort of a relatively muted quarter. After the festive season, sales dropped and then there were challenges on the demand. But still you have been able to record a pretty decent growth and pretty improved on a pretty improved margin. So on a macro basis, how was the quarter? That’s my mutation..
Shailesh Chaturvedi
So I think the quarter — I think here you have to appreciate the beauty of our portfolio. We have a such a strong portfolio of these five marquee brands are leaders in this space, super-premium, Louis Philipp sorry in super-premium segment, the Tommy and the Calvin Klein have a dominant position. US is a nearly INR2,000 crore dominant brand in the men casual space with strong momentum. Arrow is a leading brand in the farmer segment, a top ranking brand across the channel. Flying Machine is a youthful geneswear brand. So I think what we did, the whole this portfolio couple of years back and focus only on the brand. In tough market condition, this strategy always helped because we have very, very powerful brands in our portfolio. And also you have to see our portfolio and the like there is a whole casualization happening in the world and our portfolio is very casual portfolio. So this casualization also helps us more than it helps some other players. And that’s why since we always seen that the market-leader you always benefit in good times and in bad times because people — if you were to buy one T-shirt, you would rather buy a US polo than of some other brand, right? If you’re buying five, maybe you will buy some other brand. But when the markets are tough, then the leaders gain market-share and that’s what is happening. And when the market improved in winter, when the market improved for weddings and we saw strong trading for wedding dates in November and we saw early onset of winter where lot of casualization happens in the winter web. So our brands have benefited also to my team’s credit, our team have — teams have executed the plans very well. Our marketing effort, we have the investment in marketing, our quality of merchandise, the collection, for example, the FM collection, it got sold-out was very, very elevated. So I think because of our strategy of this focusing on marquee brands and our ability to, you know, revitalize the growth of these brands and investing, we have benefited. Now whether market was good for everyone or not, time will tell. But frankly, if I have to summarize the Q3, I’m very pleased with the way AFL has performed in these muted conditions in Q3.
Abhijeet Kundu
Understood. Again.
Shailesh Chaturvedi
Thank you.
Abhijeet Kundu
You have been one of our topics so thanks.
Operator
Thank you. Ladies and gentlemen, due to the paucity of time, we will take this as a last question for today. I now hand the conference over to Mr Ankit Arora for closing comments.
Ankit Arora
Thank you, everybody for joining us on the call today. If any of your questions have remained unanswered, please feel free-to reach-out to me separately and I’d be happy to answer them offline. Thanks and look-forward to interacting with all of you again next quarter.
Operator
Thank you. On behalf of on behalf of Fashions Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.