ARVIND FASHIONS LTD (NSE: ARVINDFASN) Q4 2025 Earnings Call dated May. 19, 2025
Corporate Participants:
Unidentified Speaker
Ankit Arora — Head of Investor Relations and Treasury
Kulin Lalbhai — Non-Executive Director
Shailesh Chaturvedi — Managing Director and Chief Executive Officer
Analysts:
Unidentified Participant
Presentation:
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Sam it. Ram.
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Ladies and gentlemen, you are connected to Arvind Fashions Limited Q4 and FY25 earnings conference call. The call will begin shortly. Please stay connected. Ladies and gentlemen, you’re connected to Arvin Fashion Limited Q4FY25 earnings conference call. The call will begin shortly. Please stay connected.
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Sam it it Sam Foreign.
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Ladies and gentlemen, good day and welcome to Armand Fashions Limited Q4FY25 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 during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Arora. Thank you. And over to you sir.
Ankit Arora — Head of Investor Relations and Treasury
Thanks Aviras hello Welcome everyone and thank you for joining us on Urban Fashion’s limited earnings conference call for the fourth quarter and fiscal year ended March 31, 2025. I am joined here today by Kulin Balbhai, Vice Chairman and non Executive Director, Shailesh Chadhurvedi, our Managing Director and CEO and Girdhar Chitlangya, our Chief Financial Officer. Please note that results, press release and earnings presentation had been mailed across to you on Saturday and these are also available on our website www.arvinfashions.com. i hope you had the opportunity to browse through the highlights of the performance. We will commence the call with Kulin providing his key strategic thoughts on our fourth quarter and full year’s performance.
Post that we will have Shailesh who will cover the details of business highlights and financial performance. At the end of the management discussion we will have a Q and 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. The company does not undertake to update these forward looking statements publicly. With that said, I would now turn the call over to Pulim to share his views.
Thank you and over to you Pulim.
Kulin Lalbhai — Non-Executive Director
Thanks Ankit. A very good afternoon to you all. Thank you for joining us for the Q4 and full year results. FY25 marks another year in our journey of consistent financial and business performance. AFL delivered yet another strong year in spite of a difficult demand environment where our revenue growth accelerated compared to the previous year to 8.5%. Our efforts in expanding our retail network along with re energizing the brand through strong investments in marketing is clearly yielding results. With an LTL growth of more than 5%, these investments have helped us gain market share across channels. All of these outcomes, coupled with our cost optimization efforts have helped drive an improvement in EBITDA margins by 100 basis points as we had guided at the start of the year.
As there is better visibility on profitability in one of the subsidiaries, we decided to move to a lower tax regime of 25% which will be beneficial from a reported PAC, cash flow and ROCE standpoint going forward. This led to an exceptional DTA charge of 120crores in quarter four. Adjusting for this exceptional DTA charge, our comparable bottom line grew by more than 70% for the full year. As all of you would recollect that we have consistently maintained in the past that the cornerstone of our strategy over the last few years has been to improve the return on capital employed.
We are delighted to report that AFL crossed the milestone of generating more than 20% return on capital employed this year and we hope to continue to improve upon this as we move ahead. Moving forward, we hope that the demand environment should improve gradually on account of various measures announced in the financial budget and macroeconomic tailwinds. We expect to have an uptick in our growth rates compared to FY25 while continuing to stay committed on our mantra of profitable growth. I would like to now hand it over to Shailesh Chaturvedi to take us through the specifics and more details about our financial performance.
Shailesh Chaturvedi — Managing Director and Chief Executive Officer
Thank you Kulin Good afternoon Girthav Ankit and everyone on this call. I’ll start with an overview of the full year FY25 and then move to quarter four results and we’ll end with some commentary on way forward. The key highlight of FY25 as Colleen just mentioned, has been achievement of 20% mark on ROCE in the last three years. AFL has moved from small negative RO C now to more than 20% ROCE mark. We’ve been able to also generate fair bit of cash in FY25 and there’s a good reduction in debt of nearly 75 crores at both gross and at net level.
The improvement in ROCE over last year is to the tune of around 400 basis points. In FY25 AFL recorded an SV of 4620 crores, an increase of nearly 361 crores with a growth rate of 8.5% at the start of the year. We had guided that we would make serious attempt to go for higher growth and we have seen growth move from 4.5% to now 8.5%. There was an improvement in profitability where GP has moved up by 130 basis points to 53.5% helped by reduction in discounting, sourcing efficiency and a richer channel mix. A large part of this gain at GP level has flown into EBITDA where annual EBITDA has gone up by 100 basis points to 637 crore, a growth of 17% in value over last year.
FY25 EBITDA is now very close to 14% mark in the last three quarters of FY25. NHV has been more than 1200 crores quarterly and there has been large focus on revving up demand engine which has resulted in double digit growth for our key brand like US Pool Association, Tommy Hilfiger and Kanman Klein in quarter four. Also all brands have grown double digit in revenue except for biscuits except for footwear where there are issues with BIS but which are getting sorted out and the growth in footwear also has gone up. Also there was less emphasis on liquidation channel in quarter four.
Most brands have delivered double digit growth in EBITDA in quarter four. I’m happy to state that Arrow and FM have moved to the next stage in profitability journey. These are encouraging signs. Both Tommy Hilfiger and Calvin Klein have also continued their stellar journey in FY25 with double digit industry growth as well as EBITDA growth at brand level. Our efforts have been to offer differentiated products, high quality shopping experience and premium brand experience through a 360 degree approach involving retail online presence as well as heightened marketing investment. Our focus has been on pushing revenue growth through direct channels of EBO retail and online B2C.
Both these channels have grown handsomely in FY25. The retail growth in each of the last three quarter has been at a healthy teen percentage and this growth is likely to sustain and hopefully improve further with good like to like growth of around 5% in the current market condition. A large square foot expansion of nearly 1.2 lakh square foot in full year and around 20% growth in revenue from adjacent category and along with premiumization drive and high quality execution of shopping experience. This retail channel of around 2000 crore value has very healthy momentum and is likely to grow at similar and higher pace going forward with good reduction in discounting and with leverage of this 5% like to like growth retail channel.
Profitability has also grown very well. The other growth channel of B2C online has also grown rapidly at a pace higher than 25%. We have built significant capability on online B2C sites including websites, large omni coverage, development of analytics driven online exclusive assortment and with better cost control on discounting and on cost of doing business. We have seen very impressive improvement in channel margin for B2C online channel. Both these direct channels have continued to take lead in growing AFL numbers towards its 12 to 15% growth aspirations. We’ve also continued our higher investment in marketing and this investment has remained at more than 4% in the last three quarters.
Let me focus on a huge tenfold event. In early March we did in Delhi for our marquee brand US Polo Association. This impactful event saw an exhibition polo game, a fashion show and a celeb evening in Delhi in the presence of Brand Ambassador Singh of Jaipur, Royal family and global CEO of USPA Association, Mr. Michael Prince. We got huge media coverage which helped the brand remain top of the mind enabling it to deliver market leading business in offline as well as online channels. Recently we also had a market event in Bombay for our brand Tommy Hill bigger for which Mr.
Tommy Hilfiger visited Mumbai. This was his first India visit in last 11 years. This event saw a sailing regatta near Gateway of India and also an A Lister celeb evening party hosted by Tommy Hill figures in presence of key celebrities like Sara Ali Khan, Abraham Khan, Aditya Roy Kapoor, Karan Johar, Disha Patni and cricketer Shikhar Dhawan etc. This also injected a strong dose of energy into the market leading brand Tommy Hilfiger in India. We continue to invest strongly into marketing to keep the brand strong and they will continue to up the marketing investment as a percentage of revenue.
As market leaders we want to take lead in marketing investment and ensure that our brand remains top of mind and high on the consideration set for immediate purchases. We are clearly seeing the trend of strong becoming strong brands becoming stronger. The pivot toward casualization is also helping like to like growth of our brands. You will recall that QT Q3 retail like to like was double digit at 11% and it was 5% in both quarter two and now also in quarter four at 5.2% in quarter four also we have invested nearly 30bps higher into marketing coming to adjacent category buildup.
We are seeing these categories reaching more than 20% of revenue share with healthy growth of around 20% in quarter four. Footwear increased its growth to double digit as inventory buildup started to happen. As further improvement in inventory levels happen, we expect footwear business to reach 15% growth and there is a scope to further increase it and go back to the usual 20% growth in footwear business. Elarware has also grown in FY25 at more than 15% with its momentum likely to continue on the back of strong performance in online channels. Womenwear business of US Polo has been growing at 100% and with this high pace this adjacent category will continue to grow next year at around 50% or so.
All our key growth drivers including square foot expansion, like to like growth adjacent category growth, digital business, premiumization, renovation of stores, higher marketing spend are all in very good health and ready to further fuel higher growth for ASL in the next year. Wholesale channel has recorded low single digit in FY25 while the consumer sales had grown at a higher single digit level. We are encouraged by this tertiary sales growth of high single digit and we have continued to work hard including on cleanup of inventory management in FY25 to ensure high freshness index and meet inventory norms without any unnecessary buildup of stock in the sluggish condition.
We have been maintaining strict hygiene norms and parallel sharpening inventory management for higher metabolism in wholesale channels in the near future. We are confident that with improvement in market condition, market wholesale channels will go back to their growth levels in high single digits while direct channels will take lead in growth thereby helping AFL meet the aspirations of 12 to 15% revenue growth. I also take this moment to look at three year scorecard for for AFL since FY22 which we had indicated in our investor deck. We clearly see there’s a consistent smart performance of AFL in the last three years where revenue has grown by a CAGR of 18% in the last three years.
GP has grown up at an average of 275bps every year and is likely to grow at a healthy pace that we saw in FY25 where GP went up by 130bps in full year. In these three years CAGR for EBITDA is 36% and with average 160bps increase in EBITDA every year, we are confident of increasing margin by minimum 100bps every year. Going forward. Coming specifically to quarter four, AFL recorded an SV of 1189 crores, a growth of 9% backed up by very healthy growth in direct channels and a like to like of 5.2% in retail channel coupled with reduction in discounting nearly 2% in retail.
Retail channel grew 13% and gained 2% of revenue mix online. B2C business also grew at more than 20% with significant improvement in channel margin in Q4. GP was 53.9% an increase of 270bps over last year due to 2% discount reduction in retail discounting reduction of nearly 2% retail this is a key achievement of this quarter and is a reflection of the strength of our brand portfolio and the quality of execution. We deemphasize us in winter because winter had set in early in November itself and we sold a lot of winter goods in October December quarter at full price.
We also preponed spring goods because spring had also set in early in Feb also almost a month ahead of last year. This helps us to get better sales realization and lower discounting in retail by close to 2%. This has also led to healthy like to like growth in retail of 5.2% delivering a 13% revenue growth in quarter four in retail channel with nearly 2% increase in revenue mix. The channel margin also went up handsomely because of the healthy like to like growth along with reduction in discounting in quarter four. GP was 53.9% with 270bps increase over last year due to this 2% reduction in retail discounting, richer channel mix and a large gain from sourcing efficiency for spring summer 25 season despite 30bps increase in marketing.
Large part of GP has flown into EBITDA which has grown by 15% in value in Q4 to reach 170 crore in value an increase of 80bps over last year the EBITDA stood at 14.3%. The gains in EBITDA have flown into PBT and FAT which have grown handsomely at a healthy pace. Business has generated good improvement on FOCF and there is a reduction in debt of nearly 75 crore at both gross at net level and with our asset like mindset. Capex has remained in the expected range of close to 100 crores. We believe that with likely uptick in growth, continuous improvement in GP and EBITDA and with low debt levels AFL business will generate significantly higher cash in the near term and ROCE is likely to increase further.
The key agenda in FY26 will continue to be profitable growth with expectation of higher percentage growth supporting higher profitability. While a lot of growth is linked to external market conditions and and business does get influenced by economic reality, we are confident of continuing uptick in revenue growth with even better like to like growth, higher square foot addition and fast pivot from online b2 online b2C request ankit to take forward.
Ankit Arora — Head of Investor Relations and Treasury
Thanks Shalish.
Ankit Arora — Head of Investor Relations and Treasury
We can now Open it up for.
Ankit Arora — Head of Investor Relations and Treasury
Question and answer session.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session and anyone who wishes to ask a question may press chart in one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press chart 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 assemble. The first question is from the line of Chetan from Systematics. Please go ahead.
Unidentified Participant
Yeah. Hi. Thank you for the opportunity have two questions. First on adjacent categories. So footwear, women’s kids and inner wear currently contribute over 20% of revenue and are not a drag on overall profitability. Could you elaborate on the individual profitability profiles of these specific adjacent categories relatively to share core apparel business and are there any of these categories currently operating at significantly lower margins than the apparel business?
Shailesh Chaturvedi
Hi Chetan. Adjacent category. We’ve been very, very focused on our mantra of profitable growth. So all the adjacent category. One of the expectation is to not be very margin dilutive. While we do sometimes increase a lot of marketing investment, but at a GP level, at a discount level, at a channel margin level, all the adjacency are quite profitable. In fact, categories like footwear are even more profitable than the apparel business and that performed really well. Also Innaware, we have seen a big turnaround in profitability in last two years. The pivot towards online business margin increase in innerwear has been very, very good.
Womenswear, we relaunched. We had shut down the earlier business and relaunched. We’ve been very, very watchful in terms of making sure that it remains very profitable. The growth is coming at profit at a comparable margin. While sometimes we do invest more aggressively in marketing. But at a fundamental at a business level, all the adjacent categories are fairly profitable and comparably profitable compared to the other apparel businesses. Chitin.
Unidentified Participant
Okay, that was helpful. Second question is on the new format stores. So we have introduced and are expanding new formats like Clubbase, tried Megamark, etc as of today. What is the store count of such formats and what percentage of your plan? 15% net square footage addition is expected to come from these distinct formats in the coming years.
Ankit Arora
Yes, and Ankit here. So the new formats are of course slightly smaller on scale as of now. So Club A we would have around five stores. Megamart we would have about 40 to 50, but that serves a different purpose. And Stride would be around 15. But of course there is a very, very distinct plan and probably I’ll just ask Shailesh to kind of delve on the square foot expansion.
Shailesh Chaturvedi
See, you know, I just give a little more color on the new form Megamart now we have more than 50 stores. Last three years we have really expanded. It’s a point where it’s growing very rapidly in terms of footprint as well as in terms of top line and the efficiency. So that business is really growing very well and rapidly growing. Stripe grown to more than 15 stores in a very, very quick succession. Three years back we had only two stores. Now we are close to 15 stores. We had this issue of BIS recently where the inventory became a constraint and otherwise we would have opened more stores because we at times struggled to even feed the existing site stores.
But now BIS is in many ways is behind us. The inventory has started to come. So in next six months we are very confident that all the supply chain initiatives we have taken on the footwear business, the inventory availability, assortment will reach its level. And then there’s a huge scope to take the footwear business and also the Stride as a part of the footwear studies to go forward because we want to double the footwear business in the next three years. So Stride will also show that Energy Club A currently we have five stores in south.
We are still sort of piloting the model. We opened recently last Fortnite store in Hyderabad. So we have stores now in Surat, in Bangalore, in Hyderabad. So that model is being still carefully piloted. We see huge potential in that format, but we still want to see some data. Once we get the data, we will then maybe in next six months if the model has green and we’ll expand it rapidly. But other two formats, Stride and megamard are already expanding quite rapidly.
Unidentified Participant
Okay, thank you.
operator
Thank you. The next question is from the line of Manish Pandari from Vellum Advisor. Please go ahead.
Unidentified Participant
Hi, good afternoon Kailesh and thanks for keeping up your date with the return on capital employed over these last two years. My question is related to the, my question is related to the store editions. What I see and observe is that you have a a lot of store opening and lot of store closures in the last two years. So NetNet, we have just opened 27 stores on our page. So I wanted to know about the breakup of the brand wide store additions and deletion. If you can give me some idea.
Shailesh Chaturvedi
You know, we’ve been, you know, aggressively in fact just to manage to say that We’ve added nearly 1.2 lakh net square foot in this year which is one of the highest ever for AFL. So in this quarter we added 50,000 square feet which is again a very healthy pace of expansion. Also Manish, in this year we’ve added 120 stores groan. We also closed 70 odd stores but we opened to give you a final number we opened 50 stores of adding up 1.22 lakhs per feet. In ideal word maybe next year we should look at 1.5 lakhs and higher than that.
We have also shut down because some of the stores were too small, not strategic where the sell throughs were not good, discounting was higher and also the margin profile of those stores or not. And we took a tough decision because we always think that our growth has to be profitable and a healthy growth in that mantra. But most of this cleaning up is behind us Manish now and we have closed across the brand stores which didn’t make sense and all of these were smaller size stores. The stores that we open are much bigger size. So the numbers sometimes don’t tell the story because we open 50 stores but the average size of those stores is much larger than the average size of the stores that we shut down.
So the data that I’m Looking at is FY25 we added highest ever square foot of 1.22 lakhs. We want to up it further. It should in FY26 in our view should go up to more than 1.5 lakh square and we want to look at a cagr of between 12 to 15%. More like 15% per square foot expansion. That’s the plan. We have done a lot of back end work. We’ve beefed up the team on business development and new headers in the process of joining. So a lot of efforts have been made in FY25 to clean up increase the profitability of the retail channel.
That’s why the GPUC is growing very rapidly. That’s where the discounting is coming down. That’s why our sell throughs are going up. And then now we want to go ahead and focus on one single open store open stores of larger size across the country and we will be sitting today. We feel very confident that we’ll be take the square foot addition to close to 1.5 lakh square foot in FY26.
Unidentified Participant
Sure. My second questions were related to last two years back you embarked on the journey of repositioning Arrow brand and how successful we are for Arrow as well as for Flying Machine. And you have some profitability targeting in mind which you want to achieve. And is a Flying Machine still work in progress or it’s been done and we’ll See the results for both Arrow and Flying Machine in the next two years time frame or maybe what time frame you could be very precise in putting up.
Shailesh Chaturvedi
Manish, I’m very happy with both Arrow and Flying Machine the progress they’ve made on the profitability side in quarter four. Also when I look at the data for H2 for Klein machine and Arrow, they’ve made good progress. So we are happy with the progress because the profitability in these brands in the low single digit we want to take it to the mid single digit and the journey is on. And what if I look back at what we have achieved in H2 or FY25? It gives me a lot of encouragement that we are on the right path and a lot of cleaning up has happened.
Even in stock market condition. We have seen good improvement in EBITDA profile of these brands and I’m confident that the short term target of mid single digit we will be able to achieve for Arrow and fm. They’re going in the right direction. Manish.
Unidentified Participant
Thank you.
Shailesh Chaturvedi
Janish, thanks a lot.
operator
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Unidentified Participant
Hi, good afternoon and thanks for taking my question. Sir, just wanted to understand on your adjacent categories, innerwear and footwear, what is the absolute revenues that you are clocking in each of these and what is the contribution of online channels here?
Shailesh Chaturvedi
See you know we have guided that the adjacent category revenue share is more than 20% of the company’s revenue and footwear has already crossed 300 crore mark. It’s in the journey to reach 500 crore and we’ve stated this regularly but for the, you know the BIS implementation we would have been higher than you know where we are close to 300 crores and but with the BIS behind us, all the supply chain initiatives taken and now we are seeing assortment improving and availability improving. We will hit 500 crore target in footwear with largely largest part coming from US Polo.
Tommy Hilfiger, Calgary Gland also have a healthy footwear business and footwear was started as an online first mindset and it had a higher online share. It continues to be a very strong leader in all the portals like Myntra. So very high healthy, very profitable share coming from online for footwear and that will continue while we also increase the physical footprint. The share from the US Polo store has really grown handsomely and now footwear is a very large contributor to the sale at the U.S. polo stores. And U.S. polo is opening a lot of big stores and footwear is a big Solution to a lot of these retail initiatives.
And footwear will continue to grow both offline and online and with very strong presence in online. Innerwear is a business we are seeing it will cross 200 crore in near future. The issue is that it’s very, very strong. The pivot we have made from the largely wholesale business in channel to now large online space. Again, this is another category where the online is very, very strong and the profitability of that business is healthy. So in last two years innerwear business has improved its profitability significantly and it will grow rapidly in the U.S. polo stores and in online channel which is very, very strong.
So that’s the space on innerwear. Womenswear we relaunched and again here we started with a digital first mindset. The business is largely online and we’ve recently done shop and shop for us Polo women in around 30 odd locations across the country. You know, one message I want to just give here is that online is turning out to be a big, you know, that’s a nice way to initiate or launch new initiatives, test them before we go offline. And online is becoming very, very important in terms of initiation of new categories and new businesses for us.
And it’s a fairly strong channel. We get a lot of young customers, we get a lot of zip codes which we normally don’t service. So online channel and our strength in the online channel that we have achieved over the last five years is helping us to launch a lot of these new adjacent categories and grow them profitably.
Unidentified Participant
Got it. The reason why I ask is that what we have seen in other brands is that online helps you grow to a level very fast, but beyond that it just stagnates and then you have to do the hard grind of, you know, offline. So that’s why I was asking the online contribution in these categories,
Shailesh Chaturvedi
you are quite right.
Shailesh Chaturvedi
And we’ve been also adding omni initiatives and physical retail and also omni connectivity in our physical stable. So footwear started largely an online place and we opened stride and we opened US Polo stores. Innerwear, we have done the same thing. And womenswear also, we started with online and now going offline. Our mantra is profitable growth and our brands are quite strong. So we get access to department store, to malls, to online players readily. And that’s why we are very, very conscious that we wanted to have a multi channel and very profitable growth of our brands.
Kulin Lalbhai
And just to add Sameer what Shalish said, you are right. You know, what we are really doing in a sense in summary is in an omnichannel world. Today we are testing the entire product range new categories online. First, ensuring unit economics come to a state where we would like which helps us do that because we are able to service PIN codes and service the demand very, very quickly. And then we have our entire close to more than 950 stores available for us to kind of really go out once the unit economics is set and have omni channel play to ensure the growth continues.
But of course it will start largely online to test the unit economics and do everything and then move to offline store.
Unidentified Participant
Got it? Got it, sir. Thanks very much for the detail answer.
Kulin Lalbhai
Thank you.
operator
Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Suryan Ran from Sun Securities. Please go ahead.
Unidentified Participant
Hello. Am I audible? Yeah, hi. Thanks for taking the question. So just to understand that we our square foot more store is rising from maybe 50 square foot. So are we heading towards closer to 1500 kind of figure per square foot on a long term and to understand whether larger format stores have more operating leverage than smaller ones in terms of managing admin expenses and all this. And thirdly, if you can give the square foot price data for the Mega Mars and slide.
Shailesh Chaturvedi
Yeah, see there are a lot of layers to your question. So you know, the average size of the store varies from brand to brand and a store and a format to format. Even let’s say US Polo, if US Polo is a kid, then it’ll have a certain square foot, ideally when it has a pure, you know, accessory plus men largely, they’ll have a certain size. And when we do women inside and kids inside and all the accessories is a couple of those megastores that we open which are around 4,000 square feet. So it’s difficult to say.
But I can say one thing is that our focus is on two things. One is to represent our brand very strongly. And the shopping experience should be worthwhile for a customer to park the car and come into our store and shop. And that leads to certain minimum size. So we can’t have too many small stores where the assortment gets compromised and we need for conversion, need a certain assortment. So the sizes are going up for each of our brands because we want to represent the brand in a correct way in a very stress free way.
Also our categories are increasing for each of our brand. You look at US Polo, look at Arrow, look at Tommy Hilfiger, look at Calvin. Each of our brands adding new adjacent categories. So the size is to go up. So for all the logic, the square foot of our store, our brand for each of the format is going up. That’s the reality. And we are encouraging that increase in square footage for each of our farmers. But the second and important thing is that we also want a certain sales density, a sales per square foot per day or per month.
Because if you don’t deliver that productivity, the profitability or the margin profile of the retail will not come to. So we always do a sort of a judicious sales mix that we need a certain minimum square foot, but we also want a minimum sales per square foot. And that based on these two lenses, we take a decision on the store. But it’s a fact that average size is going up. And we are very keen to open larger size stores to put the might of our brand in front of consumers in a very strong way.
Unidentified Participant
And another question is that how do you judge a new store’s performance in terms of seasons, whether two seasons or three seasons before you decide whether to close it or not?
Shailesh Chaturvedi
So that typical the industry lens on sales density, on the conversion of the customers who walked in on the sell through at full price, the stock. So that remains the same. And basically based on the consumer relationship and on the profitability of the capital assets that we build on those two grounds, then we take a call after a couple of reasons whether to exit or to continue.
Unidentified Participant
Okay. And currently the artisans are giving around 20% contribution. So if we grew at least 9 to 10% minimum, so where we lend them for maybe 2, will it be the same or it will arise.
Shailesh Chaturvedi
Maybe growth is not 10% in adjacent scratch. Growth is almost like overall growth.
Unidentified Participant
I’m talking overall growth, whether the 20% pie will shrink or go.
Shailesh Chaturvedi
No, see, in the short run we want our AFL growth move up from current 8.5% for the year. Last year was four and a half, so we moved from 4.5 to eight and a half. And we are really working hard towards the double digit revenue growth for AFL in the very near future. And the adjacent category, the way the momentum they have, they will continue to grow at more than 20%. And health, they are the main reason why the growth of a very key reason why the AFL growth will go up from 8.5% to maybe double digit.
So in the short run I see that adjacent category will grow faster and will help AFL to grow. You know, maybe in the near term that share might go up from 20% to slightly higher.
Unidentified Participant
Okay, if you can give the clover megawatts in the strides square foot every Square foot.
Shailesh Chaturvedi
I’ll request Ankit to take your details. Surinara, we can send all the details to you.
Unidentified Participant
Yeah, thank you.
Unidentified Participant
Thank you.
Shailesh Chaturvedi
Yeah.
operator
Thank you. The next question is from the line of Nysar Parekh from Native Capital. Please go ahead.
Unidentified Participant
Yeah.
Unidentified Participant
Hi. Thank you. My first question is that you know you’re talking about accessories and you know other than apparel items. I wanted to check especially in your brands like CK and Tommy. Besides the innerwear, footwear, I don’t know are there any other access to add like bags and belts and other accessories which are not there currently. Is there a scope to kind of increase your pallet to that extent?
Shailesh Chaturvedi
Mr. Farikh, Tommy Hill figure probably is the best case in India for accessorization of a brand. And in our stores which deliver very high sales density, the contribution of accessories is more than 20%. And the watches for example, we sell very large number of watches of Tommy Hilfiger. It’s a leading category for Tommy Hilfiger and the revenue if I look at MRP is into few hundred crore. It’s a very very large business for Tommy Hilfiger. We also do eyewear and we are sort of top three brand for eyewear in India. We sell many lakh pieces of eyewear in India.
Less from our own stores but eyewear has its own dedicated optician and eyewear channel and online presence. Where we sell from there we also sell. We are the leader in fact in department store and other places for belts and wallets. We sell many lakh pieces a year of belts and wallet in Tommy Hill figure. Very very large business. We also do luggage which sells from the luggage and also from online channels. So very very large business. We sell kidswear. Very well developed kids line in Tommy Hilfiger. We sell socks, we sell perfume, we sell. You know idea is that once a consumer he or she walks into a store it should convert and every usage needs a casual, semi formal accessory.
And we get a lot of young customers who can’t buy expensive apparel come to buy accessories and they become our future customers. So Tommy is very very large accessory. Probably the best in the country in our industry a very large business. Also CK felt with a certain monogram of CK is very very powerful category perfume. CK around the world is one of the strongest perfume brand and some of its perfumes like Obsession, Eternity, CK1R Perfection, Global Stars in the Face underwear. TK is one of the best brands for men underwear and also for women lingerie products in the country.
We did a big campaign we’ve been doing with Disha Patni, the underwear at the top end. TK is the market leader in India, is a fairly decent sized business. We do handbags, we do laptop bags, we do eyewear. So in these brands already very high level of accessorization has happened. Mr. Parikh. And also US Polo is the next brand where you are seeing lot of new categories, adjacent category coming and doing. And similarly we’re looking at for other brands like climbing machine with the ties and the pocket square and the belts and the wallet. So each of the accessorization the adjacent category growth is a very core growth driver for afl.
And in each of our brands will continue to launch success successfully. Adjacent categories.
Unidentified Participant
Just a follow up, you know, things you mentioned like watches and eyewear and luggage and all that. So for that also does the revenue flow to you? Because I’m assuming there are other franchisees who are kind of looking at each of those, right? So do you still from them as well?
Shailesh Chaturvedi
Mr. Marik? Most of the time we don’t get the revenue except for our own stores, cocoa stores for Tommy small business. But there the focus is on consumer relationship and we earn the licensing income. So it comes at the bottom line.
Unidentified Participant
Understood. So basically you are saying that the other. So from your revenue perspective, what you are doing is what you will continue to do.
Shailesh Chaturvedi
We do it ourselves. Kids were for example, Tommy, we do the entire business. We get the top line and bottom line. But lot of categories which we are not the expert. Somebody else is the license out. Like Titan does watches and they get the revenue and we get the royalty income.
Unidentified Participant
Understood? Okay, my second question is especially for something like US Polo, right? You reached 2000 crore, which I think not many brands in India are at that level in apparel. So there now going forward, obviously if you just look at the core business, keeping the fact, obviously you’re going to do more of innerwear, footwear, etc. But just the core men’s apparel business. How do we see growth over there? What avenues will we be looking at? Is there scope in more tier 3 towns? How do we think about the.
Unidentified Participant
Business.
Unidentified Participant
Especially given the scale it has reached.
Shailesh Chaturvedi
In fact, a very good question. And you know we always been saying first thing is to grow the core categories of a brand and then look at adjacent categories because the core business has to grow and that shows the strength of the brand. And when we do the consumer, we always check how they respond and affinity with the core categories which are like Polo T shirts or outerwear or jeans and chinos, et cetera. Now look at US Polo. We See a lot of categories, four categories having chance of growth and we are doing it. And then there’s our distribution solution.
Also on the product side, look at bottomware share. Polo US Polo association has been largely a bigger, not largely, but a bigger topware brand. Very strong casual shirts, very strong polo T shirts. But we’ve been adding a much higher quality line of jeans which are seeing very good traction with the consumer. And our share of bottom wear has gone up in last two years significantly. Our team has done a very good job on the chinos and the jeans also category like round neck tees, you know, we’re seeing good traction that’s growing really well. So in the core category itself we see large scope of growth share, increasing the share of the wallet or share of the wardrobe for our core consumers.
Also there are scope for distribution like you said. And the good thing is that at every tier we see growth. So in mega metros we are opening this large size 4000 square feet or moving from a 1500 square foot to a 4000 square feet for a higher market share gain. Second thing is that we are also going to the suburb of the big cities because you know, many, many opportunities like Bombay, you know, Watai becomes important or Dombevoli and the airport comes in Panvel, Panvel becomes important. So we are seeing traction in the suburbs of the big metro.
And the thirdly is the small tier town. Any retailer, any mall in a small town or a department store going would want us Polo as the first brand in its own box. So we are fortunate now for the, you know, making sure this happens. The four categories grow and we increase the share of wardrobe from the bottom there for example. Or we go to all the tiers of distribution growth. We are making sure the brand remains very salient or top of the mind. And that’s why you see in years Polo we have upped the marketing spend significantly.
We are focusing on the demand engine so that our market share gain that we are seeing in the brand continue very smoothly. And to ensure that this core businesses grow, we are ensuring that marketing investment increase. And every year we are increasing marketing as a percentage of sales. We are increasing that and we are doing very large event. We did one in Delhi in the beginning of March for US Polo where the global CEO came down. We had a lot of celebrities, we had a Polo game which I mentioned my opening commentary. We had an evening there and a lot of efforts are to make sure the brand remains very salient, top of the mind.
So that both product levels growth of the Core categories and also distribution side growth of the core business space for a brand like us Polo. And I think there’s a huge opportunity for growth ahead for U.S. polo.
Unidentified Participant
Good.
Unidentified Participant
Last question if I may just for Arrow and fm, could you give us what was the sell through last season and what is it like looking back to this season?
Shailesh Chaturvedi
In fact both the brands, you know we track certain KPIs for full price and then after the first EOS has a full season sell through we are quite happy across our brand including for Flying Machine and Arrow we’re doing quite well and we continue to focus on the sell through so that our discounting comes down. And when I say our retail discounting came down by 2% it came down in Arrow and Flying Machine also. I mean I said last quarter, quarter three like to like growth in retail was more than 10% 11%. So at that time Arrow and Flying Machine had also grown like 2 lakh at double digits.
So Arrow and FM are doing well in their journey just that they have a slightly smaller scale and that leverage doesn’t happen. And we are working on both solving the efficiency side of Arrow FM and also the scale side so that the brand become even more profitable.
Unidentified Participant
Okay, great. Thank you so much.
operator
Thank you. The next question is from the line of chairman from Ediko Asset Management. Please go ahead.
Unidentified Participant
Hello.
Shailesh Chaturvedi
Hello.
Shailesh Chaturvedi
Hi. We can hear you clearly.
Unidentified Participant
Yeah, Hi failures. Thanks for taking the question. So I just wanted to mention two parts. One is I mean if you’re Planning to add 1.5 lakh close credit Edison. So how is it going to be split between your new written format like your mono branch tone network and versus I mean different brands also.
Shailesh Chaturvedi
What you know your network was not that clear but I by what I’m sensing you’re asking for a square foot expansion, right?
Unidentified Participant
You I mean you’re planning to add 1.5 lakh square square footer for 26. How is it going to split between your new retail format Club a Megamart or Stripe versus your mono brand store network.
Shailesh Chaturvedi
See you know the bulk of the square foot will come from the existing brands and existing formats. Mono brand stores, what you call. Right. So that’s where the bulk of our expansion will happen and we’ll like I said stride once the inventory gets we are going to sort of ramp up further. Megamart is already we have grown from zero stores to now 52 large size 4,000 square feet plus kind of a store in last three years. But the bulk will be the what you call us Polo stores. The bulk will be The Arrow stores, Flying Machine stores, Tommy Hilfiger stores, Calvin Giant stores, those will be the core of the expansion.
And a lot of our brands are subscale in terms of the EBO network compared to competition. And there are many high street and many places, many towns where we are not present. And we have seen in some of our brands the competition has stolen. And we have the sense on the sales numbers of the competitors. So we have a clearly bridged gap. And we will want to expand overall square footage and the new formats will be between 10 to 15% of the share. And the remaining 85 odd percent will come from the core businesses.
Unidentified Participant
Okay, and second question on acquisition category, I mean on the US Polo it is around close to 25% of the. So how are you going to ensuring that expansion into categories of footwear in a way all women strengthened rather than the value of the USPS core brand identity or even the premium coevicine.
Shailesh Chaturvedi
No, I mean your point is very valid and we are very focused on profitable growth, making sure the adjacent category are relevant. We are not going into complete diversification of the brand. And we have the global sort of help from the global head office in Miami of US Polo. They’ve done extension in some countries like us or some other countries there fewer works we have not worked. So we are also, you know, learning from their global experiences. Categories. We are very, very careful, watchful. We only focus on few 4, 5 categories and make them big.
Because if you don’t make them big it will not be profitable. So we’re not trying to add too many categories and you know, they become small, small and we don’t get the margin profile. So we’ll be very careful. But whatever we decide, we will go wholehearted and we will invest heavily behind the growth of those channels will not shy away. So we do few things, but we’ll go very deep in those few things.
Unidentified Participant
Thanks. That’s it from my side.
operator
Thank you. The next question is from the line of Devanshu Bansal from MK Global. Please go ahead.
Unidentified Participant
Hi sir.
Unidentified Participant
Thanks for the opportunity and congratulations on good execution in FY25. Sir, my question is on Q1 till date trend, right? So Q4 has seen some Nike like moderation. So Q3 were double decade and now back to single digit which suggests that demand environment is still sluggish. So wanted to understand whether the current trends are already reflecting the expectation of 10 to 15% kind of growth for FY26.
Shailesh Chaturvedi
You know, whatever we witnessed in the first 45 days of quarter one, we have witnessed some uptick in our like to like and growth rates. Of course it’s early days, there’s still a lot of quarter left but we are quite happy with the way the Q1 is going till now. Also to increase for the full year the growth we will need to open much more square foot and gp. We are working very hard to make sure that our square foot expansion crosses 1.5 lakh net that I spoke about earlier in the call. We are also hoping that some of the government efforts on tax or on interest rates sort of work out and there is some tailwinds which will help us so that we can improve our like to like growth last year was 5% and if the market supports a little bit it could be a little higher percentage and that could also help us go we also seen the online this whole B2B to B2C pivot has become strong.
B2C is growing really rapidly more than 25%. So as the B2C gains continues to have that momentum then the growth rate will go up. So we are very confident that if markets sort of support little bit we will hit our aspiration of 12 to 15% and surely higher than 8.5% that we have delivered in FY25. That of course it all depends on the market condition we cannot guarantee. But our efforts are all we feel confident that we will be able to given the normal market and slightly better market, we will be able to take it 8.5% to double digit and then to 12 to 15%.
Unidentified Participant
Very encouraging. So another thing which I wanted to understand from a brand perspective. So whatever growth acceleration we are anticipating, is there any specific brands that should grow faster or the entire portfolio of five brands should grow more or less in line?
Shailesh Chaturvedi
I think every brand has its own dynamics. US Polo has very strong momentum, it has very strong investment done in FY25. So based on that strength of the brand and the investment it should have the momentum, it should grow faster. Arrow and Flying Machine have a lower scale. They are little subscale so they offers a little more opportunity for a faster growth on those brands. Tommy CK continue to grow at double digit in last so many years. They’re market leaders, the consumers continue to love them. So each segment, each brand has its own dynamics. But I think overall our businesses all will grow and we have these five brands focus brands and we want to invest wholeheartedly in the demand generation for each of the and grow towards that aspiration for 12 to 15%.
Unidentified Participant
Lastly wanted to understand you’ve given growth acceleration from top line perspective, margin improvement of 100bps is also very encouraging. Can we also see some improvement on the working capital? Do we have some target from that perspective also?
Shailesh Chaturvedi
I think you know we have made a huge progress on balance sheet item. Our inventory levels, tons of four, we moved from three tons to four tonnes consistently. If you look at last many quarters. So from where we are on inventory for example further increase will happen and we are looking at all the analytical tools, the core business, the vector supply chain project. So some improvement for sure will happen and we are very ambitious and hungry for that. But it won’t necessarily be in the same proportion. It won’t go from the way it went from three to four, it will not go to four to five.
It will be much harder working strategy from our side. But we are at is we are putting shoulders to the wheel. But I must guide you that the balance sheet side the improvement has been so, so stark and so good that the progress from here would be good but it’ll be at a slightly slower pace, better level. Look at our, you know NWC has been consistently below 60 days and you know from there onwards improvement will happen and we are confident we’ll be able to get some better inventory turn but we’ll have to do some more transformation and we are working on some of those thought processes to see how we can improve further.
Unidentified Participant
Fair enough. Sir, thanks for taking the questions. This is really encouraging.
operator
Thank you. The next question is from the line of Soumya from Insightful Investments. Please go ahead.
Unidentified Participant
Hi sir, thank you for the opportunity. Am I audible?
Shailesh Chaturvedi
Yes, you’re very clear to me.
Unidentified Participant
Yeah. So my question was regarding Arrow and Flying Machine. You said something about mid single digit growth or was it EBITDA margin that is expected?
Shailesh Chaturvedi
What I said was that these brands have low single digit EBITDA and in the short term our idea is to take them to medium term EBITDA margin because eventually long term goal is that all each of these brands have to be double digit EBITDA and when I say EBITDA pre indice I’m saying so there are pre indice EBITDA level. What I had meant was a low single digit EBITDA which our game plan is to take them to mid single digit EBITDA and then hopefully further increase.
Unidentified Participant
Understood. And sir, so you have achieved already 8.5% of revenue growth this year and you spoke about double digit growth in the near term. What timeline are we looking at for the double digit growth?
Shailesh Chaturvedi
I think in FY26 our game plan is to hit double digit and why not 12% also. But we need some support from the market because markets have been. Some of the channels have been subdued wholesale. But our online direct channels and our direct channel online B2C and retail are growing really well. And if you look at the traction retail last three quarters been growing closer to 15% and square foot expansion like to like growth premiumization, all those drivers are helping. Also on B2C the growth has been higher than 25%. We built a lot of capabilities ahead of the time.
Launching new websites, increasing the Omni coverage, more stores. The whole focus on online exclusive based on analytics. A lot of good work has happened there. So. So we are confident that these direct channels will continue to really accelerate and grow. And we are hoping that some of the slightly slower channel like the wholesale channel, whatever we have done correction in the inventory and little bit of improvement in the market condition, then they should go back to the potential of high single digit. And if the wholesale channel moves towards higher single digit growth and with the continued growth of retail and online B2C we should hit 12% revenue growth per year.
Unidentified Participant
Okay sir, understood. And just one last question. You’ve spoken about how to ensure your assortment and more categories and brands increasing to have larger size stores. Will you continue to have like four stores or will the company also have stores for you know, increased sizes?
Shailesh Chaturvedi
See I said this in many investor calls that our mindset is asset light and you know, we want to, you know, remain very asset light in terms of the capital deployment. So most of our store expansion the first preference always is a COFO model with the franchisees investment and we figured out a way we are very motivated, high quality franchisee in our network. With these partners we want to grow and we want to increase the square foot addition. The only brand where we have been doing cocoa store is Tommy Hilfiger because that business generates very large amount of cash.
And as a part of that cash allocation we are realizing that the irr on investment in the Tommy stores is very, very healthy, very very good. So we’ve taken over more than 70 stores of Tommy on a cocoa basis. But other than that one format, most of the other formats are you know, preferences for a asset like COCO model sometime based on uniqueness of property or landlord’s wish or some specific incidences. We do cocoa store, but that’s not a strategy. The focus is on asset light expansion.
Unidentified Participant
Understood sir. Thank you so much.
operator
Thank you. Ladies and gentlemen. Due to time constraints, that was the last question. I now hand the call over to Mr. Arvind Arora for closing comments.
Ankit Arora
Thank you everybody for joining us on the call today. If any of you have any further questions, please feel free to reach out to me separately and I’ll be happy to answer them offline. Thank you and have a good day.
operator
Thank you. On behalf of Arvind Fashions Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.
operator
It. Sa it.