While the long-term outlook remains strong, Axis Direct has maintained its ‘hold’ rating
On account of an increase in competitive intensity and weakening of the demand environment, Axis Direct has cut its financial year 2027 and 2028 estimates for Aditya Birla Fashion and Retail (ABFRL). While the long-term outlook remains strong, Axis Direct has maintained its ‘hold’ rating.
BFRL posted a steady around 8 per cent year-on-year (YoY) revenue increase in the third quarter of the current financial year (Q3FY26), largely driven by strong momentum in its newer growth engines. The TMRW and Luxury segments delivered growth of 27 per cent and 29 per cent YoY, respectively, while the Ethnic business expanded 20 per cent.
Performance in Pantaloons was skewed by the shift in festive and end-of-season sales to Q2 and Q4. Management noted that consumer demand remained subdued, with footfalls softer than anticipated, particularly in the East and North, as an adverse festive calendar and a high base weighed on reported growth.
The report added that gross margins improved sharply by 199 basis points YoY to 58.8 per cent supported by a better product mix and operating efficiencies, although Ebitda margins softened by 70 bps due to elevated other expenses.
Axis Direct added that the company’s strategy of expanding the product lineup through new offerings and acquisitions, strengthening brand positioning and driving digital transformation to increase online sales should support long-term growth.
“However, these initiatives will take time to yield full results. Meanwhile, post-demerger, near-term execution will be key to unlocking value. Hence, we adopt a ‘wait and watch’ approach and maintain our Hold,” the report pointed out.
The company’s consolidated revenue stood at Rs 2,374 crore, up around 8 per cent YoY, driven by growth across segments. The report added that Ebitda came in at Rs 309 crore, up 2.3 per cent YoY, while margins stood at 13 per cent, declining by 70 bps YoY.
