Arvind Fashions delivers strong performance with 106% Q-o-Q growth and cash breakeven

Arvind Fashions Limited (AFL), India's leading casual and denim player, has declared its financial results for the third quarter and nine months ended Dec 31, 2020.

Key Points

- Q3 FY21 revenue grew sequentially by 106%, driven by Q-o-Q momentum on account of stronger festive season and winter shopping, along with increased footfalls across the stores as the lockdown gradually lifted. This was further aided by continued traction in the online channel

- Overall, revenue reached 86% of last year levels in Q3 FY21. Sales recovery trajectory (Y-o-Y) was stronger across all the channels

- Power brands achieved a sales recovery of 91% with similar profitability compared to Q3 FY20, after investing behind the brandssignificantly and higher liquidation of old inventoriesto improve freshness going forward

- Unlimited achieved a positive EBIDTA for the quarter due to good sales recovery (for like-to-like stores) and the significant restructuring of costs

- Seamless omni-channel and digitalsolutions are yielding significant results. Overall online channel sales increased by 130% Y-o-Y in Q3 FY21; Direct to consumer online sales witnessed 3.3x growth over last year and now comprise 38% of our digital sales

- Deep execution on revenue as well as cost management enabled the company to achieve turnaround in profitability during the quarter for its continuing business, to post EBITDA (preIndAS) of 34 Crs in Q3 FY21 compared to 30 Crs in Q3 FY20. Continuing business achieved cash breakeven for the quarter

- Balance Sheet has been strengthened compared to Mar'20 with

* Gross & net working capital reduction by 400+ and 250+ Crs respectively in YTD FY21 through efficient inventory management and new ways of buying

* Reduction in net debt by 300+ Crs

Commenting on the performance of the company, Mr. J Suresh, MD & CEO said "We're quite pleased with better than expected sales recovery through improved footfalls during the festival period which has resulted in significantly improved profitability and a cash breakeven for continuing business in Q3 FY21. Our focus on digital and omni-channel initiatives and a deep cost focus continue to deliver robust outcomes. At the back of strong Q3, we expect H2 FY21 to be significantly better in terms of sales & profitability growth."

Mr. Shailesh Chaturvedi, newly appointed MD & CEO said, "AFL has emerged stronger from the pandemic crisis and I'm quite excited to lead our journey of providing enhanced customer xperience. Our leadership positioning in casual, denim and prestige beauty segment will enable AFL to pursue accelerated growth in the long term and create value for all our stakeholders."

With the benefit of the lower inventory levels and new ways of buying resulting in improved freshness of our stock across the channels and continued normalization of customer sentiments, we remain optimistic to improve sales through for the upcoming season, barring any significant flare up in COVID 19 pandemic.

Source : Equity Bulls

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