Relaxo Footwear: Higher operating expenses impacts profitability in Q2FY22RELAXO - 1000 Change: 7.50 (0.76 %)
News: Relaxo Footwears’ Q2FY22 results were a mixed bag. While revenue came in line with estimates, profitability was below our estimates owing to lower than anticipated EBITDA margins. Revenue grew 24% YoY (44% QoQ) to Rs. 714.4 crore (two year CAGR: 7.2%). On account of input cost inflation and a significantly higher base, gross margins contracted 660 bps YoY (flattish QoQ) to 54.8%. Subsequently, EBITDA margins declined 560 bps YoY (up 310 bps QoQ) to 16.4% (consensus estimate: ~18%).
Views: While revenue recovery was impressive, higher-than-expected other expenses (may be owing to higher ad spends and freight cost), restrained its operational performance in Q2FY22. It witnessed increase in working capital requirements in H2FY22 owing to healthy inventory stocking for the upcoming festive demand. It continues to have robust cash & investments worth | 214 crore to fund capex and working capital requirements. Expect revenue trajectory to further accelerate in Q3FY22 which should aid margins going forward. Resilient performance during challenging times builds our confidence in the business model and ability to gain market share