Relaxo Footwears LtdQ1 FY24Consumer Durables

Relaxo Footwears Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 2

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→Relaxo aims for double-digit sales growth in the next two to three years.
→Recent strategic initiatives like DMS implementation and retailer engagement app (covering 50,000 outlets, targeting 1 lakh) aim to boost market penetration.
→Focus on expanding exclusive brand outlets (EBOs) by adding 50-60 more this year (currently 400+).
→Growth in closed footwear expected to accelerate, with current capacity utilization at 55%.
→Sports/closed footwear segment growing faster than open footwear; Sparx brand (60% closed footwear) is a key growth driver.
→Premium product portfolio including Sparx to increase its revenue share beyond current one-third.
→E-commerce channel contributes about 9-10% of sales, with efforts to stabilize and grow via business-as-seller models.
→Market competitive intensity expected to consolidate, enabling market share gain.
→Capacity expansion plans are future-focused; land acquired for longer-term growth.

Margin guidance

Category 2

→Management targets double-digit revenue growth for the next 2-3 years. (Page 16-17)
→Expectation of improved EBITDA margins to around 15%-16% in the medium term, with 16% EBITDA achieved in the latest quarter. (Page 7-8)
→PAT margin and profitability expected to improve due to raw material price stabilization and other strategic initiatives. (Page 3, 7, 16)
→Focus on sales transformation, digital initiatives (DMS, BAS, retailer app), and better market penetration to drive growth. (Page 6, 16)
→ROE currently at 8%-10%, expected to improve as profit pressure eases and growth resumes. (Page 5)
→No explicit long-term EPS guidance disclosed, but overall profitability and cash flow expected to strengthen alongside revenue growth. (Page 17)
→Raw material volatility remains a risk, which may impact near-term profitability and pricing. (Page 17)

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Fundraise plans

→There is no mention of any current or future fundraising through debt or equity in the provided transcript.
→The company stated that it remains a net debt-free company as of FY24.
→CapEx of Rs. 248 crores was funded internally, including Rs. 127 crores for land purchase.
→Management emphasized strong operational cash flow supporting investments.
→No indications or plans for raising external capital via equity or debt were discussed during the call.

Order book

The transcript does not provide specific details on the current or expected order book or pending orders for Relaxo Footwears Limited. However, some related insights include: - The company is focusing on growing all sales channels, including EBOs, e-commerce, general trade, and exports. - They have implemented a retailer app covering around 50,000 outlets, aiming to increase it to 100,000 outlets to improve market reach and demand forecasting. - Inventory levels are reported to be normalized with no significant issues. - The company is targeting double-digit growth in revenue for the next 2-3 years, indicating confidence in order inflows. - There is no explicit mention or quantification of an existing order backlog or pending orders in the discussion. Hence, no explicit orderbook or pending orders data is disclosed.

Capex plans

Yes

→In FY24, Relaxo Footwears incurred a total CapEx of Rs. 248 crores, including the purchase of a 30-acre land parcel in Bhiwadi, Rajasthan, worth Rs. 127 crores for future manufacturing capacity expansion.
→Current capacity utilization is around 65%, with the newly acquired land keeping future growth in view, as building factories and expansions are time-consuming.
→No immediate plans for capacity expansion, as the company already has sufficient capacity.
→Routine machinery purchases in the range of Rs. 30-40 crores are made for back-end support, including a manufacturing plant for PU category added recently.
→The company plans to add 50-60 new Exclusive Brand Outlets (EBOs) this year, increasing from more than 400 currently.
→Strategic initiatives like implementing apps for retailer and market connect indicate focus on operational improvements alongside physical expansions.

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