Continuing its focus on profitable growth and cash flow, Arvind Fashions Limited (AFL), India’s leading casual and denim player, has received Rs. 1,119 cr in total revenues for continuing brands for the second quarter ended September 30, 2019. EBITDA stood at Rs. 112 cr includes benefit of Rs. 101 cr in EBITDA towards lease expenses, the company said.
Power Brands (comprising of US Polo, Arrow, Flying Machine and Tommy Hilfiger) revenues de-grew by 4 per cent in Q2 FY20 to Rs. 734 cr. Three out of four brands posted growth with improved sequential profitability while one of the brands continues to be impacted on account of exit of institutional channel and conscious measure to reduce AFL’s exposure to long credit cycle customers.
Specialty Retail (consisting of Unlimited, GAP and Sephora) registered flat revenue in Q2 FY20 at Rs. 248 cr. GAP and Sephora continue to post robust growth and remain profitable for the company. Emerging Brands (comprising of brands like Calvin Klein, Aeropostale, Ed Hardy, etc.) reported revenue de-grew by 5 per cent in Q2 FY20 to Rs. 132 cr. EBITDA loss was higher than estimate at Rs. 12 cr, on account of channel correction, store closure, and royalty settlement costs. “The process of exiting non-strategic brands is likely to be completed in Q3 FY20,” AFL said.
“We are on track on our strategic decision to exit non-strategic brands and alignment between primary and secondary sales. Brand exits will be completed in Q3. While this had a short-term impact on our performance, but it augurs extremely well for long-term health of our business. The external environment continues to remain volatile, but we remain optimistic about our future given our inherent strengths,” said AFL MD & CEO J Suresh.
During FY20, AFL will continue to focus on working capital efficiency through disciplined efforts around debtors’ control, secondary sales alignment, reduction in inventory and closure of unviable brands and retail stores. Meanwhile, AFL board has approved issue of equity shares up to Rs. 300 cr on rights issue basis to meet the general corporate purposes including capital expenditure and working capital requirements of the company, and to reduce the levels of borrowing for the company.
