Summary
Credo Brands Marketing Limited - Q3 FY 2026 Earnings Call Summary Tuesday, February 10, 2026 4:00 PM
Event Participants
Executives 2 Kamal Khushlani (Chairman and Managing Director), Rasik Mittal (Chief Financial Officer)
Analysts 6 Aditya Varma (Synergy Investments), Ashi (Matterhorn Investment Advisors), Deepan Sankara Narayanan (Trust Line Holdings), Gunit Singh (Counter Cyclical PMS), Nilesh Doshi (Prospero Tree), Rahil (Sapphire Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹146.1 crores | -6.4% YoY; Impacted by muted festive demand and cautious consumer sentiment. |
| EBITDA | ₹33.5 crores | -16.3% YoY; Margins at 22.9% vs 25.6% in Q3 FY25 due to higher brand investments. |
| Gross Margin | 56.5% | -300 bps YoY; Impacted by GST reforms where tax benefits were passed to consumers. |
| Profit After Tax (PAT) | ₹7.0 crores | -53.3% YoY; Sharp decline due to lower operating leverage and tax adjustments. |
| Net Store Count | 441 Stores | +5 net stores in 9M FY26; 27 openings offset by 22 underperforming store closures. |
| Working Capital Days | 179 days | -38 days vs H1 FY26; Improved collections and tighter credit discipline. |
| Ad Spend as % of Revenue | 5.0% | Planned increase to 8%-10% for FY27 to support the “MUFTI 2.0” transition. |
Geographic & Segment Commentary
- MUFTI 2.0 Transformation: The company is pivoting toward a premium brand identity with elevated merchandise and upgraded retail experiences. 12 stores have already transitioned to the new retail identity, with a target of 20 stores by the end of Q4 FY26. Initial trade and consumer feedback for the new identity is positive despite broader sector headwinds.
- E-commerce Channel: Digital sales saw significant momentum, with the website growing 87% YoY. Management attributes this to more premium UI/UX and targeted digital storytelling via YouTube and Instagram.
- Physical Retail Network: Management is prioritizing network quality over scale, closing 22 underperforming stores in 9M FY26. The strategy involves renovating existing stores based on lease remaining terms to manage depreciation impact.
Company-Specific & Strategic Commentary
- Premiumization Strategy: Shifting the brand away from its legacy perception toward a premium market position to compete with international labels. This involves a structural increase in ad spends to 8-10% of revenue to change consumer perception.
- Risk Absorption Model: Credo continues to retain 100% inventory risk from channel partners to ensure fresh seasonal merchandise. While this increases working capital intensity, it strengthens partnership relationships and protects brand equity by avoiding distress liquidations.
- GST Pass-through: Management consciously refrained from increasing prices on products above ₹2,500 despite GST hikes, while passing on benefits for products below ₹2,500 to sustain volumes during a soft demand phase.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY26 Revenue | ~5% to 6% YoY decline | Management expects demand to remain muted through Q4 FY26. |
| FY26 EBITDA Margin | ~25% (Full Year) | Expected recovery in operating margins by the end of Q4. |
| Store Count | 431 stores (FY26 End) | Net reduction of 10 stores for the full year as quality is prioritized over scale. |
| FY27 Ad Spend | 8% to 10% of Revenue | Strategic decision to invest in brand salience at the cost of short-term profitability. |
Risks & Constraints
| Risk | Context |
|---|---|
| Consumer Demand | Muted festive season and persistent cautious sentiment in the apparel sector are dragging top-line growth. |
| Margin Dilution | Heavily increased marketing spends (planned 8-10% of sales) will likely contract net margins for the next 24 months. |
| Inventory Risk | The company’s model of taking back unsold seasonal stock from partners could lead to high working capital blockage if sales momentum doesn’t recover by Spring/Summer '26. |
Q&A Highlights
Brand Spend & Profitability
- Question: Why increase ad spend to 8-10% when revenues are falling? (Gunit Singh)
- Answer: The brand is undergoing a “premiumization” pivot; these investments are necessary to stay relevant against new D2C and international competitors. Spends will be funded from existing profits, not debt (Kamal Khushlani).
Store Strategy
- Question: Why is revenue down despite opening and renovating stores? (Nilesh Doshi)
- Answer: New identity stores were opened recently and need time to mature. The company is closing non-performing units, which creates a short-term revenue gap but improves long-term network quality (Kamal Khushlani).
Inventory & Working Capital
- Question: What is the status of unsold inventory from the muted season? (Ashi)
- Answer: Goods from slow-moving channels return to the company. Historically, Credo clears these at a profit rather than deep discounting, even if it extends the working capital cycle (Kamal Khushlani).
Digital Performance
- Question: Are high social media views translating into actual sales? (Tanmay)
- Answer: Website revenue has grown 87% YoY; influencer collaborations and content creator partnerships are driving premium traffic, though the full impact will take 1-2 years to materialize (Kamal Khushlani/Rasik Mittal).
Key Takeaway
Credo Brands reported a challenging Q3 FY26, with revenue declining 6.4% YoY to ₹146.1 crores and PAT dropping over 50% due to muted festive demand and a 300 bps contraction in gross margins from GST adjustments. Despite the slowdown, the company is doubling down on its “MUFTI 2.0” premiumization strategy, increasing its marketing budget to 8-10% of revenue for FY27 and focusing on quality-led retail expansion. While net store count is expected to shrink by 10 units this year as underperforming sites are shuttered, the e-commerce segment grew 87%, signaling success in digital brand storytelling. Management remains cautious for the immediate term, guiding for a 5-6% full-year revenue decline, but anticipates a recovery in demand starting Spring/Summer 2026. Forward performance hinges on the successful consumer adoption of the brand’s more premium positioning and the management of a structurally high working capital cycle.
Want more insights like this?
Subscribe to get deep dives delivered to your inbox.
More Earnings Summaries
Explore more Q3 FY26 earnings call analyses: