Go Fashion (India) Ltd (NSE: GOCOLORS) Q4 2025 Earnings Call dated Apr. 30, 2025
Corporate Participants:
Unidentified Speaker
Gautam Saraogi — Promoter and Chief Finacial Officer
R. Mohan — Chief Financial Officer
Analysts:
Unidentified Participant
Devanshu Bansal — Analyst
Gaurav Jogani — Analyst
Ankit Kedia — Analyst
Shyam Sundar Sriram — Analyst
Sameer Gupta — Analyst
Nikhil Garg — Analyst
Varun Singh — Analyst
Akhil Parekh — Analyst
Rajiv Bharati — Analyst
Prerna Jhunjhunwala — Analyst
Presentation:
operator
SA Ladies and gentlemen, good day and welcome to the Go Fashion India Limited Q4FY25 earnings conference call. This conference call may contain forward looking statements about the company which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 this conference call, please signal an operator by pressing 0 on your touchtone phone.
Please note that this conference has been recorded. I now hand the conference over to Gautam Sarogi from GO Fashion India Limited thank you and over to you sir.
Gautam Saraogi — Promoter and Chief Finacial Officer
Good evening and a warm welcome to everyone present on the call. Along with me I have Mr. R. Mohan, our Chief Financial Officer and SGAR Investor Relations Advisor. I hope you all have received the investor deck by now and for those who haven’t, you can view them on the stock exchange on the company website at GO Colors we continue to deliver robust financial performance despite a challenging demand environment.
During Q4FY25, revenue surged by 13% YoY to Rupees 205 crores. EBITDA stood at Rupees 62 crore, a growth of 16% on a YoY basis. Q4FY25 witnessed a recovery in SSST which stood at 2.1% for Q4FY25. This performance is in line with our efforts on improvising business efficiency and implementing stored cost control measures for FY26. Our aim is to improve our SSSG and achieve positive SSSG in FY26. Over the years we’ve evolved from a leggings and churidar focused brand into a comprehensive bottomware brand. This transformation is reflected in the growth of our average selling price which stood at rupees 769, mainly driven by the shift in our product mix.
We have maintained a strong full price ratio at 95.4% highlighting both strength of our pricing strategy and continued acceptance of our products in the market. Our strategy continues to center on positioning ourselves to be the go to destination for all of women’s bottom wear needs by offering a wide range of products at accessible price points and catering to a deliverer to a diverse customer base. Moving to Operational metrics for Q4 and FY25 In FY25 we added a net total of 62 new stores bringing a total store count to 776. Some of our planned store openings in Q4 FY25 were delayed and shifted to the next quarter due to store getting prepared and some delay in that.
We have already mapped out and finalized over 30 stores in Q1 FY26 ensuring that we are well positioned for a strong start of the year. During Q4FY25 we also focused on rationalizing our store portfolio and all our store closures have been completed. With this closures done, we aspire to do an addition of net on a net basis 120 stores annually starting FY26. During Q4 FY25 we achieved a low single digit SSLG of 2.1%. While the broader environment remains somewhat challenging, we are beginning to see some early signs of gradual improvement in demand at the ground level encouraging by the trends.
We believe the momentum will continue to build and we expect further strengthening of demand as we move forward. Our teams remain focused on delivering superior customer experience and driving operational excellence which positions us well to capture the emerging opportunities. Our advertising and promotion spend as a percentage of revenue stood at 2% for FY25 which is in line with our previous commentary. Coming to our working capital and cash flows, our disciplined inventory management has resulted in maintaining our inventory days at 102 days. We believe that there is room to optimize this further by a few days which will contribute to a stronger balance sheet and support long term sustainable growth.
I’m pleased to share that we successfully achieved our target of converting 50% of our pre index EBITDA into operating cash flows during FY25. As we look ahead, we are confident of sustaining this performance driven by disciplined approach towards inventory management and our strong focus on working capital efficiency. I’m also pleased to share that we are on track to open our inaugural store in the Middle east in partnership with Apparel Group. We expect our first store to open either by May end or by June end, marking an exciting milestone in our international expansion. This store is going to be planned to open in Silicon Central Mall in Dubai.
Now coming to new Business Update Our main business remains firmly rooted in women’s bottom wear and we continue to lead this category with a strong focus on quality and customer satisfaction. A customer recognizes Go Colors as a very core functional and everyday wear brand and now we take this opportunity to extend Go Colors to new categories of women’s everyday wear and few categories of men’s everyday wear. These will include this. These will include products like basic Kurtis shirts, dresses and all day everyday casual clothing of women as well as selected men’s apparel such as polo shirts, chinos, lounge pants and casual shirts.
These products would remain functional in nature and are designed to stay in fashion for long periods of time with minimal prints and timeless styles distinguishing them from fast fashion trends. These new categories are being introduced as a pilot with only a carefully selected range of SKUs. We would be looking to have 15 stores of this new concept in the first six months phase and 10 stores in the second six month space. Since some of our existing bottomware stores are already above 1500 square feet in size, we will be using the first 15 stores of our existing network by adding these new categories in these stores with Go color seamlessly extending to become a one stop destination for all everyday clothing.
The objective here is to increase the wallet share of customers who already visit for our bottomware by offering them complimentary products inside the store. We are utilizing our existing store network for these new or offerings under the same brand, ensuring a seamless customer experience. While we are in the early stages of this pilot, we continue to be optimistic and bullish about the potential of our main business which is our bottomware business. With 120 plus new store expansion in the coming FY26, we look forward to evaluating the success of these offerings and opportunities that may unlock in the future.
Our ongoing investments in technology and product innovation continue to keep us ahead of the industry trends. As the broader industry begins to recover, we are well positioned to deliver strong performance in the years to come. With this, I would like to hand over the call to our CFO Mr. R. Mohan for an update on Q4 and FY25 results and financials.
R. Mohan — Chief Financial Officer
Thank you, thank you Gautam and good evening everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First of all, I’ll give you the financial highlights for Q4FY25. Our revenues for the quarter stood at rupees 205 crores as against 182 crores in Q4FY.
FY24 a growth of 13% YoY. Gross profit stood at rupees 132 crores, a growth of 14% YoY with a GP margin of 64.3% for the quarter. Our EBITDA for the quarter stood at rupees 62 crores as compared to 54 crores in Q4FY24 a growth of 16% yoy. Our EBITDA margin stood at 30.5% profit of tax for the quarter at rupees 20 crores and witnessed a growth of 52% yoy PAT margin stood at 9.7%. Coming to the FY25 performance, revenue stood at rupees 848 crores in FY25 as against 763 crores in FY24, a growth of 11% yoy.
Gross profit stood at rupees 537 crores, a growth of 14% yoy with a GP margin of 63.3%. For the year ended, FY25 EBITDA for FY25 stood at rupees two hundred and sixty eight crores as compared to Rs. 242 crores. For FY24, a growth of 11 percent yoy. Our EBITDA Margin stood at 31.6%. PAT for FY25 stood at Rs. 93 crores as compared to Rs. 83 crores in FY24, A growth of 13% yoy. Our PAT margins stood at 11% ROCE and ROU excluding India’s impact as on FY25 stood at 19.2% and 15% respectively. Cash and cash equivalents including mutual funds and fixed deposits stood at rupees 249 crores as on 31st March 2025.
With this now we will open the floor for the question and answers.
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 N1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star N2. 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 Devanshu Bansal from MK Global. Please proceed.
Devanshu Bansal
Hi Gautam. Congratulations on good pickup in LFS channel and thanks for taking my question, Gautam.
All through the weak demand environment that prevailed over the last couple of years. Right. So we remain focused on this women bottom wear category. And now when we are seeing some green shoots, we are experimenting with new categories including menswear as well. So I just wanted to sort of dive deeper into the thought process behind this experiment. And do you also fear some loss of brand positioning or shopping experience for women because of this?
Gautam Saraogi
Yeah. Thanks Ivanshu. See, I think look, the idea here to do an experiment is not to dilute the brand. Obviously we feel the brand can get very well extended to other essential categories of women and very few categories of men.
See, even the experiment what we are doing 80, 85% of our product range, what we are introducing are going to be in the women’s space. There are some complementing products or menswear which we see can sell very well with the women’s wear. So the positioning here is to create a essential everyday wear type of clothing store. Like I’ll give you a closest example. So how you have like a Uniqlo internationally where a Uniqlo resembles functional, functional fashion round the product for women and men. We are trying to create, we are trying to look to create that in the women’s wear space with a very small experiment in the menswear space.
So the positioning is going to be more from a perspective of how a Uniqlo is internationally. Make that more like an Indian Uniqlo version to cater to the Indian customer with more everyday wear and functional clothing. So our idea is not to become a fast fashion brand. It’s going to be on the thesis of it being core functional, high quality and very sharp pricing. So the pricing also what we are targeting for this is going to be between 818.
Devanshu Bansal
Interesting. Gautam. So you mentioned that in first year I guess the plan is to add about 25 odd stores or maybe experiment this in 25 odd stores but eventually going beyond FY26.
So what’s what, what’s the exact plan? As in do we plan to open larger stores?
Gautam Saraogi
Well right now it’s just a pilot. So for me to give a guidance on this is very difficult. But because we’re doing it as a pilot, we feel a 25 to store pilot will do justice. So luckily what happened when we were analyzing how much square square feet we would require for this concept in our current network of stores we have about 15 to 20 stores which are greater than 1500 square feet and are close to 2000 square feet. So the best way we felt of doing piloting was that those stores are already doing very well adding categories.
In those stores the customer footfalls are already very strong. So in the first pilot we are doing it in our existing network of stores which are greater than 1500 square feet so we don’t incur rental costs. And based on the pilot we will, we will strategize on how to go and take it in the future.
Devanshu Bansal
Understood. And so last question on this. Are you also sort of exiting from some of the women bottom weight catego to free up space for this? Because obviously those 15002000 square feet.
Gautam Saraogi
No, no, I are bottomware categories in those 15 bottom west stores where I’m going to be adding categories the bottom well size will nowhere reduce.
That will not get diluted.
Devanshu Bansal
Understood. So last question from my end, ebo SSD has definitely picked up but in some sense it has been led by improvement in realizations. Right. So almost like 2.3% gain in realization and 2.1% increase in SSD. So. Exactly. Wanted to understand as in volume growth remains muted. So what are the steps that we are taking to sort of improve the volume growth at the same store level?
Gautam Saraogi
See, I think look, we have seen some traction in Q4. January and February were relatively good months and even March, the second half of March also was good because we had an early eid.
So I think look, the consumer sentiment is improving. So this is the first time we are seeing some decent low single digit SSG from a positive perspective. I think in the coming quarters, as demand keeps improving, the value SSG will improve and even the volume SSG will improve. So I think it’s a matter of time when this is improved, even the other will improve as well.
Devanshu Bansal
Understood. Any initial signs in April, sir, so far are you seeing some improvement versus whatever
Gautam Saraogi
April? Right now from what I see, April SSG has been flattish. So we are expecting May and June to be good.
But April has been, has. Has been a little slow.
Devanshu Bansal
Thanks for taking my questions.
Gautam Saraogi
Yeah, no problem.
operator
Thank you. The next question is from the line of Gaurav Jogani from JM Financial. Please proceed.
Gaurav Jogani
Thank you for taking my question. Sorry Gautam, but I missed on this new category thing that you mentioned what all things would be introducing. If you can help me out with that again. Sorry.
Gautam Saraogi
Yeah, yeah. So Gaurav, basically see what we are doing is we are entering into the women’s top space by doing basic tops, basically basic, basic shirt, basic dresses. And the prints and the basically the design of the clothing is going to be more timeless.
For example, it’s not going to be fast fashion. So here the prints and the styling is going to be more core and functional in nature. So we are introducing some new categories which are more everyday wear for women and we’re doing some selected styles for menswear. So the idea here of positioning go colors is more from the perspective of it becomes like a one stop destination for functional everyday clothing. Like the closest example I can give you. Like what Uniqlo has done internationally, right? Uniqlo has done a fantastic job internationally by attracting customers and giving them very solid functional products where it’s not linked to fast fashion.
So we are also trying to benchmark them and trying to create like a Indianized Uniqlo version of Everyday Wears. So that’s a thought behind it. But the idea is obviously to test it and do a pilot in 15 to 20 stores like I mentioned. And if the pilot does well, then we will strategize how to take it further.
Gaurav Jogani
Next question is with regards to that, the Reliance credit note that you can be receiving Q4, right. How much of that has, you know, contributed for this in this quarter?
Gautam Saraogi
Last year? Last year during the same quarter we had received a credit note of about 8 crores.
And this year for the for quarter four, same quarter we have received 11 crores.
Gaurav Jogani
Okay. Okay.
Gautam Saraogi
So the delta difference between this quarter and that quarter would be about 3 crores.
Gaurav Jogani
And this would be recognized in the LFS revenue, right?
Gautam Saraogi
Yeah, yeah, of course. This will be part of the revenue in that.
Gaurav Jogani
Yes, correct. Okay. Okay, sure. And lastly, you know what could be your guidance in terms of the the LFS editions? Because you know, this year also the NFS additions has been also been lower. So going ahead, what kind of LFS editions that we can see,
Gautam Saraogi
it’s a little hard to say right now.
See for evos we are able to predict Gaurav, but I’m guessing if I have to be conservative, I think about 100 additions in the coming FY26 on a conservative basis because I have visibility for hundreds, it might be more as well. But because LFS expansion, we don’t have a control on LFS expansion to a very large extent. So on a conservative basis I would say about 100 SOL, we should be adding an FY26.
Gaurav Jogani
And Gautam just lastly on the MBO100,
Gautam Saraogi
100 stores is more from a gross perspective. See again, we don’t have a control on certain shutdowns across certain channels.
So on a broad level we see ourselves adding about 100 stores in LSS in FY26.
Gaurav Jogani
Okay. And Gautam, just lastly on the the MBO page as well last quarter we did mention that we have hired someone for this position. And how is the progress on this aspect?
Gautam Saraogi
Well, business has been doing good. In fact, we are seeing a 30, 40% jump on a YUI basis in MBO business. But of course the base is very small. So the jump would be very would look very large right now. But right now we are more in the stages of appointing distributors, making the infrastructure ready.
So I think we’ve actually tied up with some very good distributors across south and north. We’re actually doing for other large brands as well. And I think in the coming in the coming quarters, we see good traction in NGO
Gaurav Jogani
and would this lead to any sort of jump in the working capital? I mean what would be the
Gautam Saraogi
no see working capital cycle? I don’t see a big change because even though we are going to be working on credit with certain distributors across giving that credit, we are also taking a deposit from the distributor at the same time.
So if, if we net off the deposit against the receivables, I don’t think it’s going to be a very heavy working capital business.
Gaurav Jogani
Okay,
Gautam Saraogi
thank you.
operator
Thank you very much. Before we take the next question, I would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Ankit Kedia from Philip Capital. Please proceed.
Ankit Kedia
Gautam, just on the new category addition in the stores, you know, from taking it from pilot to expanding it across the stores, what will you monitor in KPI terms to consider it as a success to take it to the next level? What are the key monitorables, you know, for us and for you?
Gautam Saraogi
Ankit? See right now very difficult to say because see currently we have been working in a template where we used to take an average of 400, 500 sft 30 EBITDA business with the ROI of 15 months.
This is the bottomware template, right? So as far as this new concept is concerned, which will require space of more than 1500 square feet, it’s very difficult for me to give a KPI guidance right now. Our obvious idea is to first at least generate decent good amount of sales per square feet and the store should be better than EBITDA Breakeven. So I think it is something which we will also learn over the next seven, eight months as we open those new concept stores. So for right now, for me to have a KPI guidance, it’s a little difficult.
It is something which we will also learn as we keep opening.
Ankit Kedia
Given that these stores are already functional, assuming the SSG and everything remains the same and there is no change right in the business throughput despite adding new categories, will we consider that as a success or no?
Gautam Saraogi
See, ideally I would like to see those stores at least. Suppose for example, I’m giving you a hypothetical example, right? Suppose a store is doing 10 lakhs a month and I’m adding these new categories. So then I would see, okay, is it doubling my sale? If it is doubling my sale or my sale is even increasing by 50, 60% then I know we are heading in the right direction.
Because I’ll tell you what happens when we are going to be doing this product introduction. We are also going to make mistakes, right? Because we are bottom bed specialists now when we are getting into topware, we will also learn, we will make mistakes. So I think as a initial, even if you’re able to generate the 30, 40% additional sale over our current number of that existing store, I think then we are heading in the right direction.
Ankit Kedia
But this store will also have the existing inventory. Right. So if the density of the store is X, so you will be stuffing the store with higher inventory so that the current business remains at
Gautam Saraogi
actually what happened.
There were many stores because of location. We had selected stores and the rent was in our budget. So we happen to have and have also 1600 square feet stores in our rooster. But in those very last stores, I was only using a certain section for my inventory. I was not using the balance section. I was keeping the balance section more as a storage for as like a backend storage for staff room and all those other things where I was not using as part of showroom space. So now what I’m doing is I’m just expanding the space for which I’m already paying the rent and keeping inventory there so my bottomware inventory and size don’t get diluted at that particular store.
Ankit Kedia
Understood. Second question to this is typically in the menswear and the women’s wear, you need separate trial rooms, right? So from a capex perspective in that store, how will that look and feel change how much more capex needs to be done to incorporate menswear and what will I can understand women where you know, it can seamlessly be on the same floor. From a women menswear perspective, will that store have 10% inventory? 5%? Do you expect men to come in or women to shop for men in from that inventory?
Gautam Saraogi
Yeah, see I’ll explain to you. So I’ll tell you 80% of our new styles, what we are launching, 80 to 85% would be around women’s best because that is our forte.
That is a fill. Now why do menswear? Because we seen that these products of menswear are complementary and can sell very well. So here, by keeping that 15% inventory, that 15% or 13% inventory of men, we are also seeing that, okay look, a lot of our women customers are accompanied by men. So I think it will be a good complementary product to sell with women’s wear. See, our overall vision is to make a one stop destination as far as everyday wear is concerned. So but right now I can’t skew my inventory where I have 40% or 45% men because men is not my specialization.
So that’s why I’m keeping myself to my specialization and having 85% women’s inventory and having only about 15 to 13% as men’s inventory. Now coming from a capex perspective, yes we would have to undergo additional capex not only for men, even for the women’s space because we are extending the space in the existing store which we had blocked. Right. The showroom space was less, the additional space was blocked. So when we are going to be doing the additional space capex, I think to the extent of 2000 to 2500 rupees per square feet we will be incurring capex of that additional space.
So for example, if I’m having a store which is 1500 square feet and currently I’m using 600 square feet for bottom there, the balance 900 square feet with where the capex is not done, I’ll be incurring say 2000 to 2500 rupees per SFC for the additional 900.
Ankit Kedia
Understood. And from a provisioning perspective, right. So Today we are 95% full price retailer going forward given that there’ll be some fashion element and Uniqlo does discounting, you know, of the unsold inventory. So how will you take that into. Do you see that change for topware?
operator
Sorry to interrupt Mr.
Ankit Kedia.
Ankit Kedia
No, no madam, I’ll just complete this question. This is a very important question, please.
operator
All right sir, all right.
Gautam Saraogi
Okay,
Ankit Kedia
yeah. So from a provisioning from discounting perspective because top guys is different, competitive intensity is very different compared to your bottom wear. Right. You are actually head on competing with Jockey and others who also have similar functional products at a sharp price point. So how do you, you know, how does that move your gross margins and provisioning and discounting.
Gautam Saraogi
Yeah, see from a, see from a full price sales ratio, Nonkit, your point is very well taken.
Even I don’t visualize that the full price sales ratio will be more than 95. It might be for all you know but today as of now, I don’t know what will be the full price sales ratio. Right now based on the research what I’ve done, I know it is a very high full price sales percentage category. But whether it is going to be 80%, whether it’s going to be 85% or whether it’s going to be close to 90%, that is something we will know only after the pilot here. I’m keeping my fingers crossed because the full research, what I’ve done the results show that this is a very high full price sales category only once we implement it, we will know it.
So from a provisioning perspective and full price sales ratio guidance perspective, once the pilot is done, I’ll be able to probably answer more questions maybe in the second quarter. Now coming to what the idea behind this, right. Competing with other people like other brands like Jockey and like the good brands you mentioned. Right. See the idea here is simple because my stores are having footfall of women. They’re coming, they’re buying in bottomware. And from the consumer research I’ve done, those women are also seeking to buy top fair from Go color. So for me, the store which is already having very high footfalls for bottom web purchase, if I keep top fair as an adjacent category in that particular store, for me to sell then and there to the customer is not going to be so difficult.
If I was launching a separate identity for topware, then driving footfall in that new store is very difficult because then you’re competing with others. Here I am basically capitalizing and tapping into my existing customers who are walking in for bottom there. So it is a. I would rather put it that way. It’s a much safer pilot this way rather than me creating a separate identity for this concept.
Ankit Kedia
Fair point, Gautam. And all the best for the extension. Thank you so much.
Gautam Saraogi
Thank you uncle.
operator
Thank you. Thank you. The next question is from the line of Shyam Sundar Sriram from Franklin Tempton.
Please proceed.
Shyam Sundar Sriram
Yeah. Hi. Hi Gautam. Good evening. Gautam. On this new category from our earlier conversations as well, and typically in women’s wear, the top wear product is a fashion product. How does it align with our low fashion everyday essential philosophy that we are trying to pilot here? Any thoughts on that?
Gautam Saraogi
Yeah. So she’s from definitely topware is fashion. Right. Going back to my earlier commentary on the top being fashion, the bottom being top wear is fashion. I don’t say no. But the kind of fashion we are trying to do is more everyday fashion where the entire thing is more is more is not seasonal, it’s not fast fashion.
For example, if I’m introducing a print, it will necessarily not go out of fashion for the for I say maybe for the next 12 months or 15 months. As I speculate, it will not be as fast as three, four or three months or four months. So right now selling those basic tops with the bottoms, I think it’s a good complementary product which we feel customers will buy. This is actually based in this actually entire thing started on because of the consumer research. We have done a lot of consumer research. When we did with our consumers, a lot of consumers said that why don’t you introduce basic tops, why don’t you introduce more core products in other categories.
And from there only we got this idea. So we are quite hopeful that this should sell well with bottomware. We don’t see right now. We also don’t have many answers frankly. So you hear me repeat the same thing again and again. But we are quite positive that it should sell with bottomless.
Shyam Sundar Sriram
Sure. And from an organization perspective, in terms of design teams, are there any areas that we want to build upon to make this pilot more successful? How do we from an organization development needs.
Gautam Saraogi
See, from an organization perspective, Shyam, we have strengthened our product and develop our design development team.
So we have a separate team within our product and design team which is working only on this. The bottomware team still continues to be separate because at the end of the day when we are doing this pilot we cannot dilute our main business which is a fast growing business. So the bottomware team and the design team is separate. And this for this pilot it’s a separate team. So from a team perspective we are very well equipped. This is from a product team, from the, from the other operational team. The teams are going to be common for this and for our bottom there.
So we don’t see any dilution either way.
Shyam Sundar Sriram
Understood? Got it, got it, got it. And just one other point. This LFS grow, revenue seems to have grown very well in this quarter. You made some comment that I think I missed it. Can you just repeat that? Sorry, I see.
Gautam Saraogi
See largely see the question. Actually what the earlier person had asked was different. So basically what has happened is we get a credit note from Reliance, our largest LFS partner every quarter four. And we have been having it. We have been getting that for the last three years.
So the question was that last year we had got a credit note of 8 crores. This year we got a credit note of 11 crores. And obviously this credit note gets added on to the LFS revenue for that particular quarter. That is what the question was actually.
Shyam Sundar Sriram
Okay, okay, okay. So 11 crores is the credit for this quarter.
Gautam Saraogi
Credit note which is coming in quarter four, which was last year eight crores and quarter four.
Shyam Sundar Sriram
Okay, so. So the difference is three crores. Got it, got it. Just one last question. On the network side,
Gautam Saraogi
the another one of the reasons why the elephant growth is also large because on a net basis through the 12 months we’ve ordered, we’ve added about 197 stores if I’m not wrong.
And because of that 197 stores, the growth also will show higher. Because the minute I send inventory to the 197 stores the sale gets booked in my books as debtors. Correct? Correct. So that is another reason why the LFS growth will show higher than evo.
Shyam Sundar Sriram
Understood? Got it. Got it. Got it. Understood. There’s one other thing.
operator
There’s a lot.
Gautam Saraogi
No, no. Madam, let him please complete. Please.
operator
Okay.
Shyam Sundar Sriram
Yeah, yeah. Just one last question. On this MBO network you did talk about appointing distributors and you know, having a slightly different network approach. This. While this is very good, this is slightly a deviation from our network strategy in terms of, you know, owning a large part of the network and you know, having LFS as a more complementary channel.
How does this having distributors and having a very different MBO channel gel with our overall network strategy? Will. Will it create any channel conflicts? That is the other part of the question.
Gautam Saraogi
Correct. So Shyam, I’ll tell you what you’re saying is absolutely right. And this was my earlier belief that we have to be very channel discipline. See, the reason why we are doing MBO selectively is because we feel it’s a like LFS mbo also the very good customer acquisition channel. So what we are planning to do is we are qualitatively going to supply only to the very large key MBOs which refrain from discounting.
And with the discounting control will be in our hands. So only to those very clean MBO stores we are going to be supplying through distributors. And those MBO stores houses many customers who are very loyal to those particular MBO stores only. So by that we are basically exposing our brand to a much larger customer database out there who eventually will actually see themselves also shopping in the EBO after getting acquired in an mbo. So here the idea is not to go and supply the the product range to every MBO store in the city but only give it to the cream and the quality ones.
Say like Potis, for example. Something like that. Example. Potis, Naidu Hall, Jai Chandran. Like a few names, right. Who are very disciplined in their discounting but has have a very strong loyal customer base.
Shyam Sundar Sriram
Got it. Got it. Thank you. Thank you. Gautam. I’ll call back. Thank you.
Gautam Saraogi
Yeah.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference please limit your questions to two questions per participant. The next question is from the line of Sameer Gupta from India Infoline. Please proceed
Sameer Gupta
Hi and thanks for taking my question, sir.
Firstly, a little deviation from other participants. Come back to the core business. So store edition this year, again guidance is 120 to 150. Now I understand there were large accelerated store closures in the last two years. But even if I adjust for a gross, on a gross basis, There are around 100 store editions now. Unless the overall demand environment has changed materially, what is the confidence of this 120 to 150 store editions in FY 22nd.
Gautam Saraogi
So, Sameer, very rightly you asked. In fact, I should have clarified this earlier. See, actually see if I look at our opening, right, so we have had 104 gross openings and our target was about 120 to 150.
So we’ve fallen about 15 to 20% short than our guidance. I think, look, this year it was some projects got delayed and that’s because of that reason, the 104 was a lot lower than the 120. That was one reason. And also it being a tough year, we were also a little more careful in our business development approach. But I also have seen that the momentum has picked up. We have good number of stores opening in Q1. So we have more than 30 stores which are under fit out and should open in Q1. So I think we as management are quite confident that we will open a bare minimum of 120 and maybe go even higher if the opportunity comes by now, as far as consolidation is concerned, I would like to really clarify on the call that we are done with all our consolidation.
We don’t see any more consolidation in this year, this coming financial year maximum, what will happen in the normal course of business if we shut four or five stores maximum, that will happen. But large consolidations of the nature of what has happened last year will not happen this year. At least
Sameer Gupta
this is very helpful. One last question, if I may squeeze in now, again, coming back to the pilot that we are talking about. So this is a pretty, you know, large step in going into a category with its own complexities. Is it like an acknowledgement that, you know, we need to diversify, we are a single format company and as this is getting more mature, 776 stores across 180 cities already, it is probably time to start, you know, incubating new categories.
And this is just the start here. So I mean, what is the trigger here?
Gautam Saraogi
See, I’ll tell you, Sameer, honestly, I think as management also, we fundamentally believe that it’s better to experiment and do new things when your main business is growing. Well and doing well. So our main bottomware business, if I keep the recent demand challenges aside, we’ve had good growth in our main business. We’ve added good number of stores, operational metrics are in track and the business is generating very strong operating cash flow. When the balance sheet hygiene is so good, where the operating cash flow is much higher than the CapEx and we are generating free cash flow and main business also is doing well, I thought it’s a good time to do experiments.
See, because if I do experiments I will succeed, I will fail. Maybe if I try two things, maybe one thing will work, one thing will not work right. By the time we reach some sort of maturity in the bottomware business in the coming years, maybe something else new will become big. So I feel looking at the financial metrics of the business and how it’s doing well based on cash flow and growth, I thought it was good to do some experiments but calculated experiments see what we are doing right now. It has been in the pipeline for the last one year.
We have given it a lot of thought. We have built a team that knows how to execute this. You understand when I built a team for topware it was not my existing bottom where designers or product development people I’ve used to make software. I hired a separate team and expertise in my product development team. So I’m doing it as a very different exercise rather than mixing it with my bottom wear exercise. So it’s been calculated, it’s very calculated and I think it should succeed. But yes, when we are doing experiments certain things will succeed, certain things will failure and I think we’ll have to take it and I think it should, you know, the pilot should do well over the next six months to a year.
Sameer Gupta
Okay, so let me flip the question a little. In the current scenario you have 120 to 150 store editions in go colors, the prime format and also the added complexity of managing a pilot. Is there enough fund internal accruals etc. To fund these new developments or overall developments? Or do you also foresee, you know, taking some debt from the market to fund these projects?
Gautam Saraogi
No, no. See actually if you see our balance sheet is very well funded. If you see this year we have generated 76 crores of pre indirect operating cash flow and we have generated 50 crores of free cash flow.
So here the investment, what I would be doing in the pilot is not going to be very high. It’s going to be on the inventory part and on the CapEx part. And I think the operating cash Flow of the business is strong enough to fund this. This pilot.
Sameer Gupta
But
Gautam Saraogi
sorry,
Sameer Gupta
we should look at CapEx including in this operating cash flow, right? I mean that is also
Gautam Saraogi
the business is generating. So the business is generating. This year the business has generated 50 crores of free cash flow. Which is much higher than what I would be investing in this pilot.
Let me put it that way. So even after doing this pilot there would still be free cash flow
Sameer Gupta
and the 2030 stores extra that you would also want to open in your go color cv, you’ll still be net cash, you’re saying?
Gautam Saraogi
Yeah. It should be generating. We are. Cash flows are very strong. So even after considering this pilot, we should be in a position of generating a strong free cash flow.
Sameer Gupta
Got it. Got it. That’s helpful. Thanks. Thanks. I’ll come back in the Q1.
Gautam Saraogi
There’s one thing to clarify here, Sami. The 120 to 150 stores.
What guidance what I’m giving you is for the prime bow color in my existing stores. I’m doing the pilot of the 15 stores. It’s not a separate addition to the 120 to 150.
Sameer Gupta
But eventually the pilot will also become, you know, more meaningful, right? So that’s.
Gautam Saraogi
Yes, but that. That I would be able to take a call only after the. After what is the result of the pilot? If the pilot does well and we feel we want to add. So that will be. That might be additional. But right now we are focusing only on the pilot.
Sameer Gupta
Got it. But eventually if it is successful. Let’s say you would require funds, right? I mean that’s a. That’s a normal assumption.
Gautam Saraogi
I think the. I think the cash flows are strong enough. Samir. I don’t think we will have a problem.
Sameer Gupta
Fair. Fair enough. Fair enough. This is. Okay.
Gautam Saraogi
I’ll connect with you offline and I’ll connect with you offline and explain to you on this.
Sameer Gupta
Sure. Sure sir. Looking forward to that. Thank you. Thank you. Thank you so much.
operator
Thank you. The next question is from the line of Nikhil Garg from BNP Parib Bus. Please proceed.
Nikhil Garg
Hi Gautam. Many congratulations. Good set of numbers. Three questions from my side. I’ll just ask all three and then you can ask once. Working capital side, there is a good increase in paid receivables. So if you can, you know, throw more light. More light on it. Second, what is our differentiation strategy for your. For your category expansion sector, menswear and all. Like why would anyone come to you? Is it similar to colors, right? That you have more color options? Or what, what is the exact strategy which will, you know bring customers to your store. And third, if you can throw some light on the competition, you know I’d heard from the market that you know Aditya Bella ATS 11, which was their bottomware store, those have a lot of those project closed in northern India.
So you know, if you can throw some light on the competitive intensity within the bottomless
Gautam Saraogi
on the first question on the working capital. So the debtors have actually gone up by about 6, 7 days Nikhil, which I think will stabilize in Q1 because we’ve added about 70, 80 stores in Q4 also. And through the year we’ve expanded into shopper stop and lifestyle. So the debtors are slightly higher because the secondary sale is yet to fully kick in those stores to the magnitude of the primary sale. So I think this better will stabilize in Q1 or maximum by Q2.
So I don’t see that from a working capital concern. A big concern. From an inventory perspective. See we had about 102 days of inventory in last March and now also we are at about 102. Usually our inventory spikes a little bit in March because of summer season but through the year we see our inventory days between, we would target inventory days between 90 days and 90 days days is our target. Now coming to the second question, what you’re talking about is the, the new, the new concept and the new categories we are launching. See the fundamental, what we want to be known for is our comfort, quality and pricing.
See one of the reasons why customers have again and again women customers have again and again come back to a go colors time and again is because they feel okay. Yes, it’s a, it’s a very high quality product from a comfort perspective and the pricing is sharp. So as a positioning perspective, Vocalist is known for these two things and those two things are the things aspects what we are going to be fundamentally extending to these new categories as well. So this is the basis on which we are trying to we have made our product now hopefully the pilot should do well and you know, and then we’ll probably learn a lot more things.
But the two fundamentals on the basis of which we should be standing aside from other people in the industry is probably our comfort and our bicycle and on the competition part. So we’ve seen not much competition come up recently from a bottomware perspective. So I think a lot of competition like you mentioned have also consolidated. So from a bottom wear competition perspective we don’t really see any standout bottom wear only brands. But yes, as bottom Wear as a category has expanded. We have seen other players in top wear also add bottom wear to their to their existing portfolio of topware products.
But bottom wear only brand, we have not seen much competition in the last recent times.
Nikhil Garg
Got it, Got it. Thank you so much.
operator
Thank you. The next question is from the line of Varun Singh from Alpha. Accurate advicely. Please proceed sir.
Varun Singh
Thank you very much. So my first question is in the bottomware segment you called out that you know, if the category is maturing then it is better for us to, you know, maybe have a larger addressable market maybe. That is the reasoning which quite explained this foray into the menswear segment. So just wanted to understand that you think that you know, maybe at 1100 or 1200 number of stores level the category appears, appears to be matured meaning that maybe 8 to 10% kind of a growth possibility.
If you can throw some light on that.
Gautam Saraogi
No, no, see I, I didn’t say. No, I, I can’t correct it. See, I don’t say that the bottom wear category is matured. What I meant was see right now the bottom wear category has a lot of potential and maybe in the coming years eventually it will mature. So my perspective was saying was that before it matures and tapers off, probably it’s a good time to do some experiments. So right now from a bottom web perspective we stay very committed to that business because that is the bread and butter of our business and we see strong potential of growth in the coming years.
So I don’t think the bottomware business has reached any maturity stage. It is just. What I was trying to give an example was that before the bottom wear business reaches maturity in the coming years it’s better to do little few experiments during when your main business is growing. Well, that is what I meant to say.
Varun Singh
Sure, understood. And secondly on you know the Uniqlo benchmarking that you alluded to, just wanted to get that understanding right Given that Uniqlo is 10,000 square feet box size retail and you highlighted about 1500 square feet allocating 30% of space for the menswear segment and maybe the pilot of 1520 store incremental scale up etc.
So like how are you will the template be similar what you are doing in the bottom where with regards to channel strategy that we will be selling our product through MBO, LFS etc. Because Uniqlo is not doing so. And in that context, I mean what do you think would be the true blue blood differentiating factor with us? Because I think Uniflow H and M and other people, they compete very strongly on design and all those things. But we are saying that we want to stick to maybe essentials and not too much of fashion. Fashion. Because I don’t know how you want to strategize the full price sale.
Will that be similar to whatever or not? If you can throw some light.
Gautam Saraogi
Yeah, yeah. See, from a size perspective, look, we are not looking to do 10,000 and all that’s very large. I think we should be able to achieve what we want out of 2000. 3000 square feet. I think 3000 also will be a fit. I think our idea first is only to do between 1500 and 2000 square feet. See, at vocal, we’ve always created a template where we take small spaces and show productivity. And we are also approaching this new concept on the basis of the same template saying that, look, take small sizes and get higher sales per square feet and with higher replacement cycles.
So I think we should be able to achieve what we want in this range of 1500 or 2000 or 2200 square feet. So from a sizing perspective, I think this is our first step. As we do this, we keep learning. We will make some mistakes also. We’ll keep learning and correcting those. But at a gross level, if I see, I see ourselves in this range of between 1500 and 2000 square feet. As far as the new concept is concerned, see menswear again, look, it’s a very small space which I’m allotting for menswear. 85% or maybe more inventory is going to be women’s wear, which is my forte.
Yes, we bought in a very different flavor by adding that 14, 15% of menswear as a pilot. We’ll have to see how it goes. But since we are a strong women’s brand, we have kept that product focus also on more women’s wear by having it at 85%.
Varun Singh
Name of the store would be go color only. Even in this store, which
Gautam Saraogi
the branding, the branding, everything will be go color.
Varun Singh
And similar to bottomware. We will be selling menswear through MBU and large format stores.
Gautam Saraogi
No, no, no. Entire. No, no. This right now, this new concept, whatever, I thought it is going to be very, very limited to our own.
Those 15 stores. What I was talking about and maybe the website eventually
Varun Singh
and similarly, like 95% would be the full price sale or we are expecting it to be so similar to the bottom
Gautam Saraogi
that we don’t know yet. We know it’s a high sales category ratio, but that is something we Will know only after the pilot.
Varun Singh
Because we will be dealing with essentials in terms of the product
Gautam Saraogi
here. I speculate and I’m. I’m more. I’m confident that it’s going to be a high full price sales ratio category. But I don’t know the number yet. I will know only after the price.
Varun Singh
All right, sure. Thank you very much.
Gautam Saraogi
The idea here is to lead to those 15 stores and maybe the website in the maybe after a few months.
Varun Singh
Understood? Sure. Thank you very much and wish you all the best.
Gautam Saraogi
Thank you. Thank you so much.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participants. The next question is from the line of Akhil Parekh from BK Securities. Please proceed.
Akhil Parekh
Yeah. Thanks for the opportunity and congratulations Gautam, you and your team for more resolute performance and tough times.
Basically my first question is on the marketing activities, right? Given that we are spreading now into functional there as well. I understand it’s. It’s only limited to pilot stores. But I believe that there is a certain kind of consumer association of go for us brand with the women there. So what kind of marketing activities are you planning to increase the awareness about menswear? And will our marketing spends meaningfully go up say your next six to 12 months as a percentage? That’s my first question.
Gautam Saraogi
Yeah. So Akil, see I think look from a marketing amp strength perspective I don’t see see the percentage increasing.
I think we will be at 2% and I think through the 2% we’ll be able to do justice for a bottom wear and for the new pilot as well. So I don’t see our A and P increasing in any way. And as far as blue colors being a women’s brand and whether men’s will buy or not, I, I, I visualize that it should not be a problem. But I think through the pilot we’ll get a better understanding. But for me I’m having my fingers crossed that it should not be an issue for whatever little bit market research I’ve done.
I studied other international brands also who have women only and then turned men and women looking at those case studies as well. I’ve done a very deep understanding of those case studies. I have a strong feeling that men should be able to buy it. But again we will know only after the pilot. So fingers are crossed.
Akhil Parekh
No, but from awareness perspective any specific activities we are going to conduct.
Gautam Saraogi
See the. Right now the awareness is going to be more limiting to the redoing of the store. So we will obviously try pulling in crowd for women and men.
But the focus of getting customers in will be more women oriented.
Akhil Parekh
Okay. And the second and last question is. We’ve seen very few brands who have actually succeeded across both MBO and your channel. Say unlike you are a jockey, he has a very strong brand recall value. But. And we are also saying that we are going to focus more on the NGO channel. So what’s your thoughts like? Usually we are seeing brand dilution.
Gautam Saraogi
So. So. So you know this is a good question, Akhil. And this is something which we debated internally also. See, I’ll tell you what our idea is not to make MBO a very large channel.
Honestly, EBO is going to be the bread and butter of the business which is going to grow the fastest followed by lfs. See, NBO again is a channel strategy like how we had adopted the lfs. It’s a marketing channel for us. Not a marketing but more of a customer acquisition channel for us. So we will give our product only to those MBOs or key accounts where brand dilution will not happen. So it is going to be done in a very selected and qualitative matter manner. See, my idea here for gaining market share is not just to go and supply to every MBO in the industry.
I don’t want to do that. I want to give it only to the ones that matter. So the brand also does not get diluted and we acquire customers as well. But from a channel split perspective, EVO is today 72 to 75% of the business. It is just going to go stronger from here. It is not that we are moving our channel strategy towards mba. That’s not the case.
Akhil Parekh
Okay. Okay. This is helpful and best lecture.
Gautam Saraogi
Thank you. Thank you so much.
operator
Thank you. The next question is from the line of Rajiv Bharti from Novama. Please proceed, sir.
Rajiv Bharati
Hi Gautam. Thanks for the opportunity. So this is regarding your comparison with Uniqlo. Now our legacy format itself has an inventory turn on let’s say on cogs of close to 1.3, 1.4 versus let’s say Uniqlo doing three times and now incremental expansion on let’s say other categories. Do you intend to carry lower inventory and address this part somehow so that the inventory turn number basically on cogs rises particularly because the optimal risk increases incrementally.
Gautam Saraogi
See, what you’re saying is right, Rajiv. The inventory turns in this newer category should be higher. So we’ve also been very careful with how Much inventory we are buying for these newer categories.
So the idea would be to have more turns than what the bottom web business is doing. Because the bottom web business is supply chain is a very different type of supply chain. So the inventory turn in this should be much higher. But again it is all depending on how the response is. But our planning is on the basis of doing much more turns than the bottom web business.
Rajiv Bharati
And secondly on the core business, the geographical split, the general senses are probably north east is doing slightly better. But your expansion, at least for the last year or so, both I think in if I’m not wrong in EBO also has been less on the north and still slightly steeped on the south.
Are you trying to address that?
Gautam Saraogi
No, no, it’s not like that. It’s just basis on what is good real estate available. See, I mean look, we have been expanding everywhere we whatever is relevant, what fits our requirements. So maybe it just so happened that we got more stores in the north. I don’t think we are trying to concentrate more on north and east. We are having a equal importance given as far as southwest northeast is concerned. Yes, the one thing, what we are definitely trying to do, irrespective of the zone, we’re trying to also add more stores and more newer cities so that basically we are growing horizontally and not vertically.
I mean look, we have always been a cluster based expansion model but to grow, to drive some balance. We are also trying to add more stores in newer cities so that we are able to acquire newer customers also in new towns. Whether it is southwest, northeast. Is it possible to call out what is the South SSG on the EBO site versus the 2% for the. I think, I think the South SSG also has been positive. It’s I think around 1%. I’ll come back to you on that number. I don’t have it handy but it’s. I think it’s around 1%.
But one thing I know the North SSD is high. North SSG is around 5 to 6% and West SSG also is slightly higher. So I’ll come back to you with that data.
Rajiv Bharati
Thank
operator
you. The next question is from the line of Prerna Junjunwala from Elara Capital. Please proceed.
Prerna Jhunjhunwala
Hello, thank you for taking my question. Hi sir. So just wanted to understand this new. There’s a lot of questions around but what I’m just trying to understand is the core product that you are talking about. Because if we look at Uniqlo, which is your benchmark there, you know, you know they can go ahead with, you know, because it’s totally western wear category, it can go ahead with similar products, no problem.
But when we come to Indian categories, fashion is actually a big component in a top wear category. So how are you going to look at the mix in Western vs Indian wears? And how do you define core over there? I’m just trying to understand that,
Gautam Saraogi
See. Yeah, I know, see. And it will be a little hard for me to explain it because the product obviously is not hit the shelf. I think once probably the store opens and you get to see it, you’ll understand it a little better. But I’ll try explaining it. I think it’s going to be a good mix.
It’s going to be largely western with a little bit of fusion touch as well. So. So I think it’s going to be more of western, little of Indian, little of western. And. And the kind of way we are going to be playing with the colors and prints, it’s not necessary that those prints will not run for more than two years or more than one year. It should proceed to the next season as well. So that’s how I develop the product. But look, I will be in a better place to explain the product to you once it actually hits the shelf.
Prerna Jhunjhunwala
Yeah, I understand. I was just worried on the fashion content because in the top wear, especially Indian wear, the fashion wear component is much higher.
Gautam Saraogi
See, one thing, Rena, we are very clear. We are going to stay away from occasion where our product line is not going to be occasional. It’s going to be under basic everyday. Because we don’t want to be occasion wear brand. That. That is not who we are.
Prerna Jhunjhunwala
Okay. Any menswear also, isn’t it largely T shirt track pant category or it will get into formals as well?
Gautam Saraogi
No, no, not formals. More T shirts, loungewear type of category.
Polos. Polos, brown neck T shirts like those.
Prerna Jhunjhunwala
Okay, understood. So my second question is on in the inventory. Do you see any risk to inventory in this format coming in? Whether you’ll be able to maintain inventories at current levels or we should see a sharp. We should see some increase, not sharp, some increase in inventory levels with new categories coming in?
Gautam Saraogi
Yeah, See, I’ll tell you what, I am not taking a very big inventory this year. See, today because of my volume of business, what I have in my main business, I’ve been also been able to optimize on what I’m buying for this new category.
So even in this new category is slow to begin with, which fingers crossed, obviously you should do well. But even Worst case scenarios which is slow to begin with. I don’t see my company inventory days going very well. So that I think will be very much in control because I know inventory is a killer in this business and retail business. So we are very careful with how much we are buying and even in a scenario where sales are slow for the spider and the pilot maybe is little slow to begin with our inventory days will not spike so much that operating cash flow.
Actually I’m not worried on pilot at all. I mean it’s, it’s about the long term goal on the inventory that could change with new categories. See on the midterm and long term prena very difficult for me to comment because we not started yet. So maybe, maybe if a year goes by then I will understand what kind of turns I’m doing in the new pilot. I’ll be able to give a guidance on that. As far as the code bottom bear business is concerned I think 90 to 95 days is a business model which we have cracked very well which will also further optimize in the years to come.
And in terms of profitability, any guidance on how the profitability can be feed us for the next one year. See we will look to maintain margins without being specific on EBITDA percentages or pat percentages we will look to maintain margins at a P level from a gross margin perspective I see our gross margins you know in maybe in the range of 62 to 63% or maybe a little higher. But I think maintaining gross margins and maintaining in P L margins will be our end of in FY26
Prerna Jhunjhunwala
and CAPEX guidance in case you’re opening more larger stores given this pilot coming in whether this year we’ll see larger stores coming in.
So what will be the capex spend for the year?
Gautam Saraogi
See I think I can tell you on a per square feet basis because I don’t know how many stores I’m going to be opening on this pilot because you see the cash catch here is my first pilot is also my existing store network. So the capex is not going to be very high but if I take On a per square feet basis it will be about 2000 rupees to 2500 rupees per square footage.
Prerna Jhunjhunwala
Any increasing warehousing or refurbishment requirements that could add up to this
Gautam Saraogi
we have been see that Prina we have been doing in our existing warehouse for some some time now.
See we had a 1 lakh square feet warehouse in Pilpur. There was some space behind which we extended so that we had extended regardless of this, pilot or not. So our current location is well equipped to handle any future growth.
Prerna Jhunjhunwala
Okay, thank you.
Gautam Saraogi
Thank you.
operator
Thank you. Ladies and gentlemen. That was the last question for today. I would now like to hand the conference to the management for closing comments. Over to you, sir.
Gautam Saraogi
I’d like to thank everyone for being part of this call. I hope we’ve answered your questions. If you need any more information, please Feel free.
Contact Mr. Devendrawa from SGA, our Investor Relations Advisors. Thank you
operator
on behalf of Go Fashion India Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.