Growth trajectory for ABFRL to remain strong; Lifestyle, Pantaloons to lead

Its key segments of Lifestyle and Pantaloons are expected to post mid-teen growth

A strong operating performance in a challenging quarter led to a 4.4 per cent uptick in the stock price of Aditya Birla Fashion and Retail (ABFRL). Led by growth across its various segments, the company posted 14 per cent year-on-year uptick in revenues in the quarter. 

The company’s largest segment of Lifestyle brands comprising Allen Solly, Van Heusen, Louis Philippe, and Peter England posted a revenue growth of 15 per cent. The segment, which accounts for 54 per cent of the top line, was helped by a same-store sales growth of 7 per cent. 

In addition to the core portfolio of men’s apparel, what led to the higher growth were category extensions of women’s and kidswear. On a smaller base, the women’s wear segment (Allen Solly and Van Heusen) grew 60 per cent, while the kidswear segment (Allen Solly) grew 30 per cent. In addition, what helped was the expansion of Peter England’s Red stores in smaller towns at lower price points as well as traction for its e-commerce business. 

The major gains, both on the revenue and operating front, came in the Pantaloons segment. The second-largest of ABFRL’s divisions, Pantaloons registered a healthy revenue growth of 16 per cent, with like-to-like growth at over 10 per cent. The company indicated that product improvement and availability led to the growth. 

The growth in operating profit, according to the company, has been consistent in seven of the last eight quarters. Operating profit margin for the segment grew 40 basis points over the year-ago quarter, despite a 34 per cent increase in marketing spends. What should help is the plan to increase the private label share in Pantaloons to 70 per cent over the next couple of years, from the current 62 per cent. 

While the company has not guided for growth in the coming quarters, it indicated that top line growth for the two major segments will be in the mid-teens. Given the strong performance in a tough environment, most analysts have a ‘buy’ on the stock and expect growth trends to continue.