Aditya Birla Fashion Q3 Results: Profit Slumps 94% On Higher Expenses

Aditya Birla Fashion and Retail Ltd.'s third-quarter profit fell, missing estimates, owing to an increase in marketing expenses after a two-year hiatus amid the Covid-19 pandemic and strategic investments in new ventures.

The consolidated net profit of the retailer, which operates Madura Fashion and Lifestyle and Pantaloons, plunged 17.9 times in the December quarter to Rs 11.21 crore over the previous year, according to its exchange filing. That compares with the Rs 154.3 crore consensus estimate of analysts tracked by Bloomberg.

Sequentially, its net profit fell from Rs 29.42 crore.

• Revenue rose 20% to Rs 3,589 crore, compared with an estimate of Rs 3,320.3 crore.

• Operating profit dropped 25% to Rs 435.6 crore, against a forecast of Rs 556.3 crore.

• The margin stood at 12.1% versus 19.5%. Analysts had projected it at 16.8%.

• Expenses surged 31% to Rs 3,603 crore.

• E-commerce sales grew 33% year-on-year.

This is the fifth consecutive quarter of double-digit revenue growth over the pre-Covid period, the company said in a statement.

The growth in the quarter, it said, was driven by "strong" like-to-like across its branded segment and consistent performance in e-commerce.

Like-to-like is a measure of growth in sales, adjusted for new or divested businesses. In Q3, Reebok transitioned into the company, while its house of brands venture, TMRW, announced strategic partnerships with eight digital-first brands, six of which are already integrated into the portfolio.

"The company continues to execute its long-term strategy by playing across emerging consumer spaces," it said.

Net profit for the quarter, however, were impacted by a 2.3-fold increase in marketing and strategic investments in new ventures.

"The quarter saw accelerated marketing investments post a hiatus of two years across businesses, as the company reinstated its rigor on augmenting its brands and building customer engagement," according to the company.

Lifestyle Brands: This was the best quarter for the branded portfolio, as revenue grew 18% year-on-year to reach Rs 1873 crore on the back of 5% like-to-like growth. Ebitda stood at Rs 317 crore. Occasion and work wear performed relatively well, and the women's segment grew 26% over the previous year in the third quarter. The marketing efforts of brands returned to pre-Covid levels, resulting in a noticeable rise in overall brand recognition.

Pantaloons: The third quarter growth needs to be seen in the context of the shift of Pujo to the second quarter during this year. Despite slowing sales post-festival season, Pantaloons recorded its highest quarterly sales in the third quarter. Ebitda was reported at Rs. 168 crore.

Inner Wear And Athleisure Segment: This segment posted a 10% revenue growth year-on-year despite the overall slowdown in the athleisure segment. The business expanded its footprint rapidly. As of December 2022, it had a total of 159 exclusive stores and 31,000 trade outlets. The quarter also saw the business launch its largest nationwide television and digital ad campaign.

Youth Fashion: This business, consisting of American Eagle and Forever 21, delivered a "strong" performance. American Eagle saw 46% revenue growth over the previous year and like-to-like growth of 24%. Forever 21 grew 15%.

Ethnic Businesses: The businesses grew 66% year-on-year, driven by aggressive network expansion and brand-building initiatives. Sabyasachi grew 23% year-on-year, as the brand crossed Rs 100 crore quarterly revenue. S&N posted its highest-ever quarterly revenue with 43% growth over last year.

Super-premium brands, comprising the multi-brand format "The Collective" and other super-premium brands, saw a revenue growth of 43% over last year and like-to-like growth of 24%, the company said.

Normalisation of offline businesses, proliferation of e-commerce, and continued penetration of organised and branded apparel are expected to continue to drive growth for the company going forward, it said.

"With multiple growth drivers at play, ABFRL is strategically positioned to capitalize, having firmly established its presence across multiple categories, segments, channels, and price points," it added.

• Branded business networks gained 245 stores, including newly integrated Reebok stores.

• The network of small-town formats within Lifestyle brands is now 550-plus stores strong.

• Ethnic businesses added 15 new stores. Men’s premium ethnic wear brand Tasva added 11 stores during Q3, taking the total count to 32.

• Pantaloons added 10 new stores to the network.

• Forever 21 also added five stores on a net basis during the quarter.

Overall, the company has a network of 3,848 stores across 32,589 multi-brand outlets, with 6,048 points of sale in department stores.

Shares of Aditya Birla Fashion and Retail fell 1.58% on the BSE after the results were announced, compared with a flat benchmark, the Nifty 50.