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  • 27 Jul 2022
  • ICICIdirect Research

RELAXO FOOTWEAR REPORTS MULTI-YEAR LOW EBITDA MARGIN

RELAXO - 823 Change: -4.65 (-0.56 %)

News: On a favourable base, revenue grew by 34% YoY to Rs 667.2 crore (down 4% QoQ). The company has been able to maintain gross margins in Q1FY23 at 54.1% (flattish QoQ and YoY). However, owing to higher other expenses (up 6% QoQ, 43% YoY) and negative operating leverage, company recorded multi-year low EBITDA margin to the tune of 12.9% (down 301 bps QoQ). Absolute EBITDA declined 23% QoQ to Rs 86.1 crore. Consequently, PAT for the quarter declined by 39% QoQ to Rs 38.7 crore.

Views: Relaxo had undertaken one of the steepest price hike (~25%) in FY22 to combat significantly higher raw material prices. Relaxo normally caters to the value segment and such steep price hike appears to have negatively impacted the volumes. The demand for open footwear (80% revenue contribution) has also moderated on account of opening up of schools and offices with demand trend shifting in favour of closed footwear. With normalisation of business scenario, expenses have reverted to pre-covid levels, however decline in volumes is curtailing the pace of revenue growth and resulting in negative operating leverage which is expected to pressurise the margins in the near term.

Impact: Negative.