Campus Activewear (NSE:CAMPUS) Q2 2027 Earnings Call

0:04 Ladies and gentlemen, good evening, and welcome to the Campus Activewear Limited's Q2 and FY FY 'twenty seven Earnings Conference Call. Before we proceed on this call, Campus Activewear would like to point out that the discussion may contain forward looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business that could cause future results, performance or achievement to differ significantly from what is expressed or implied by such forward looking statements. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the management's commentary. To discuss the results.

0:56 I'm pleased to welcome mister Nikola Aggarwal, chief executive officer, mister Uplak Shtiwari, chief operating officer, and mister Rakesh Thakur, chief financial officer of Campus Activewear Limited. Thank you, and over to you, sir, for your opening remarks. Thank you. Good afternoon, everyone, and thank you for joining us for Campus Activewear's quarter two FY twenty seven earnings call. I'm pleased to share that campus has delivered another strong quarter with the revenue growing 16.9% Y o Y to INR $4.52 crores, driven by volume growth of 10.2% to INR 6,300,000, alongside a 6% improvement in ASP. This performance is particularly encouraging in a relatively subdued consumption environment.

1:42 More importantly, our growth is increasingly being driven by stronger fundamentals, a broader consumer base, a richer product portfolio and deeper market penetration. Our continued investments in product innovation, design and distribution are translating into tangible results. First, we are successfully expanding our consumer base. Our women and kids categories grew by 2734%, respectively, during first half FY 'twenty seven, significantly outperforming the overall business. These categories represent substantial opportunities to expand our addressable market, and we believe we are still in the early stages of unlocking their potential. Second, premiumization is emerging as a powerful structural growth driver. Our products priced at 2,000 and above have delivered volume growth exceeding 50% Y o Y with the contribution to the overall volumes increasing from approximately 9% to 13%.

2:39 This reflects growing consumer preference for differentiated design, comfort and quality. Third, we are strengthening our omnichannel presence. Alongside our traditional distribution network, we are witnessing encouraging traction across emerging digital platforms, including quick commerce and our own brand website. The combined contribution to D2C online revenue has doubled Y o Y during the quarter. Our strategy is clear, make campus available whenever our consumers choose wherever our consumers choose to shop while maintaining a sharp focus on channel productivity and profitability. Coming to profitability. Our material margins remained under pressure due to significant inflation in key input costs. While we have taken calibrated pricing actions, there is an inherent lag between higher input costs flowing through our inventory and the corresponding pricing benefits being fully realized.

3:33 It is important to distinguish between recovering absolute input costs and protecting a percentage margin. We believe maintaining the right balance between growth, consumer value and profitability is more important than pursuing aggressive price increases for short term margin protection. Despite these pressures, we delivered EBITDA growth of 12.5 and pad growth of over 21% Y o Y, reflecting the resilience of our business. Looking ahead, we expect a meaningful recovery in profitability during second half of the year, supported by the progressive benefits of pricing actions, improving product mix, operating leverage and continued cost discipline. We remain confident on delivering our full year FY 'twenty seven EBITDA margin of 17%.

4:20 Stepping back, I believe Campus is entering an important phase in this growth journey. FY 'twenty seven is about sustaining growth and demonstrating operating resilience despite significant input cost inflation. FY 'twenty eight will be about converting this stronger growth platform into accelerated earnings and improving profitability. We remain committed to building a larger, more diversified and increasingly profitable campus while creating sustainable long term value for our stakeholders. With that, I would like to thank everyone for joining us, and I hand over the call to our CFO, Mr. Rakesh Thakur. He will take you through the financial performance in greater detail. Thank you, Nikhil. Good afternoon, everyone, and thank you for joining us for the Q2 FY 'twenty seven earnings call.

5:08 I'm extremely pleased to report that we delivered double digit volume growth in back to back quarter one and quarter two consistently, which is taking the H1 growth at 11% combined. For the quarter, the volumes grew by 10.2%, revenue from operations grew by 17% closer to 17%, which has taken our revenue to INR $4.52 crores, with steady growth across all the channels. At Trade distribution registered growth of 14%, while our D2C online channel grew by 22%. D2C offline grew by 13%, wherein retail, in fact, did pretty well.

5:55 We sold, like Nikhil mentioned, 6,300,000 payers during the quarter, and ASP has grown by 6% year on year. And women's and kids shares in the revenue mix have inched up from 21.7% last year to around 22.7% during this quarter. Our gross margin, like Mikael mentioned, that's at are at 51.4% in the current quarter versus 53.9% in last quarter. And we did witness inflationary pressure on material side. Our EBITDA grew by 12.5% year on year to 62 crore, and the margin stood at 13.5% during the quarter, which is a marginal decline by 50 basis points versus the last year.

6:44 But we recorded a strong 21.3% growth in PAT, outpacing revenue growth and PAT stood at INR24 crores, which is 5.3 during the quarter, an improvement of 20 bps versus the same quarter last year. That's on P and L side. Our balance sheet remains strong with ROCE improving at to almost 22.3% and ROE at 18.5% as of September 26. Our net working capital days have in store during the quarter because of the season planned buildup of inventory for the season in Q3. I think with this, I will conclude my remarks and open the floor to the moderator for Q and A session.

7:37 Thank you. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. First question comes from Mahesh Solani from Go Quarter. Please go ahead. Mister Mahesh, please go ahead with your question, sir. There is no response.

8:23 The next question comes from from MK Global. Please go ahead. Hi. Nikil and team. Thanks for the opportunity. Congratulations on good back growth in the quarter. Sir, you have shared some interesting insights this time around. So I just wanted to check on this kitchen performance where opportunity I mean, what is the current scale of the industry per se and what kind of market share are we targeting in these segments? So whatever initial thoughts you have, if you could share share some sort of insights on that will be helpful. Devanshu. Can you please clarify again, which segment are you talking about?

9:10 And Performancewear. Kids and Performance, okay. So see, these are absolutely nascent segments. We've just started revamping these segments and very aggressively so, both women and kids. And we have these are pretty much like white ocean like blue ocean market for us. There's white completely white space, big white space. And we believe that there are very few organized players targeting these two segments. So CAMPUS definitely has a big right to win given our expertise in both of these segments, especially the sports shoes and the sneaker market, along with performance where we are entering now also aggressively. Performance is the next growth driver.

9:56 We've already launched badminton and now in the process of launching cricket and running shoes very, very soon. So this can be a good opportunity, great opportunity for campus going ahead as a growth vertical. Our growth vectors have been performing very well, and they have been delivering majority of the growth actually outperforming the core business. So Prat, would you like to add something here? Yes. Like Nikolay mentioned, right, we have launched three new business opportunities this year. I mean apart from performance, there is apparel, which was launched primarily in retail at stage one, Elan was the second launch. And now we are entering into performance as a third launch, right? We have launched this category about sixty days before through an online platform, and the initial results are extremely positive.

10:43 We have even seen the and other products on Flipkart and Amazon as well, right? And we believe this will be one of those drivers of disproportionate growth for us because of the white space that Nikhin mentioned, right? Kids also, we have seen like you've seen over the last two to two point five years, you've seen disproportionate growth coming from women's in our business. You'll see a similar pattern coming through kids as well. You've seen the initial nation state with disproportionate growth coming from the school shoe category for us this for the last two quarters. The same will flow into other ancillary categories of sports shoes as well as smaller kids or kids of a lower age segment as well. So the same story that we have delivered with women as a business, we will be delivering with kids in the going ahead session as well as performance is going to be a very big bet, starting with badminton, moving on to running football and cricket as well.

11:36 Got it, sir. That's very encouraging. Secondly, I wanted to check some of your peers who play in the value segment have shared very aggressive outlooks on in terms of growth. So wanted to check, is this a sector wide uptick in growth momentum that you are noticing? And whether you would also like to sort of provide some medium term growth outlook for CAMPUS as a whole, so that would be helpful. We are our direction remains consistent. We believe to be delivering mid teen growth. And we are what we have delivered, and we continue to deliver on the similar pattern going We don't see any changes in that future looking forecast. For this year? For this year, yes.

12:23 Sir, just a small follow-up here because peers like Asian, etcetera, are indicating like 25% kind of growth outlook, right? So wanted to check as in, is this kind of a conservative kind of stance that you are sort of adapting or whether we can see positive surprises on the growth trend because the opportunity seems to be very large? So we will not leave any opportunity on the table. We are focusing on all segments that we need to address while being financially prudent as well. So our growth has always had a backing of financial prudence behind it. We will take decisions looking at profitability of the category, and we will not run any business for driving revenue without it adding to our bottom line, right? So we are very clear on that principle. And wherever we see of India, we'll go aggressive.

13:09 We are confident of delivering mid teen growth. In thing, of course, we have a bigger plan for the near for the long term as well. But at the current juncture, for this financial, we will want to stick to a mid teen guidance as of now. Got it, sir. Thanks for taking my questions and festive greetings to the team. Thank you. Thank you, sir. The next question comes from Videsha Seth from Ambit Capital. Please go ahead. Hi. I hope I'm audible. My first question is pertaining to the channel wise growth. So when I see the growth in the trade distribution channel versus the EBO channel, trade distribution accelerated to around 14%, 15 odd percent, but EBO has probably moderated to 11% due to the festive shift impact.

13:57 So fair to say that the distribution channel would have seen sufficient inventory for the festive season? And how to specifically think of growth for this channel going forward at primary and secondary level? So EBO number is has a bit of underlying reason to it, like you like we have given your commentary earlier as well. We were in process of a model transition for franchise, which is now 100% completed, almost 50 odd stores got converted in quarter two as well, which, of course, has an accounting where you take the inventory back and then rebuild it. So it has an impact of inventory coming in the system and going out again. And hence, the franchise number will start showing double digit sorry, significantly higher growth. Just to give a perspective, in the same quarter, our cocoa business grew at a like for like above 20% as well as the partners who transitioned in quarter four of last year have shown the range growth range of 20% to 40% for H1 of this year. So we are very confident that this retail number, which shows a slightly lower number of 13% of retail, that has other channels as well. There is LFS within that as well. But we are very, very confident of showing double 20% -plus growth on the retail front because that is already what we are seeing. Just the model transition is taking away some of that positive repercussions coming there. But you will see that number improving in the upcoming quarter.

15:18 So and on the trade bill, of course, the seasonality has shifted a bit later. We have seen that happening, same with online, same with off line. But it's not the growth is not driven by this aggressive inventory buildup, which is in line with our standard inventory factors. So you would expect the 15% growth in the trade distribution channel to largely sustain even going forward? In that range, in that range. Got it. Secondly, we were to break down the ASP growth of 6% into premiumization and even price hikes that would have probably been undertaken, Can you call the bifurcation out? And even going forward, to what extent do you expect to see this ASP growth shape up?

16:06 So our ASPs, like we've taken approximately 40 of ASP junk in terms of absolute value. INR 13 or 12 to 13 is attributable to the premiumized INR 2,000 plus rupee segment. And the balance is the product mix and the MRP increases that we have taken, right? So that's the broad split of that. This is basically, this was enough to offset any increase in raw material inflation that we have witnessed. So that we had accounted for and that is the kind of increase that we took in the MRP. Got it. And the third question was on the T2C or the online channel. How different is the portfolio and price points being sold across your own website versus likes of Amazon, Flipkart and QC?

17:04 So there is so I'll take the brand.com question first. Brand.com will share almost an 80% portfolio with what the rest of the marketplace operations will be selling. Plus, they will also have access to the retail exclusive lines, which will only sell between retail and brand.com and will not be offered to the rest of the marketplace ecosystem. BigCommerce is a much more limited set. We were only selling, for example, open footwear and bring it for the longest time, only about two point five, three months. We just introduced about three shoes. ZEPTO is a portfolio of about eight to nine products across some four open footwear and four closed footwear. So much more limited type portfolio available to these products and not the entire gambit that we have to offer between these channels. So the growth that you've seen in your brand.com operations, that would primarily be led by which price points or any particular part of the portfolio, if you'd like to call it out?

18:01 It will be on similar lines as a marketplace, but the ASP behavior is significantly better than a marketplace operation because we also work on selling more premium and showcasing products like Elan as well as our retail efficiency ranges there. So the ASP profile would at least be 8% to 10% higher than our marketplace business today. The product that we sell, of course, in 80% of profile matches with what we sell on our partners' commerce as well. So the product profile will not be very different, but the new age category that we do, be it apparel, Ilan, all performance products or premium inclusive, will have a higher share on our brand.com as compared to marketplace operations. Got it. And lastly, if I may, if you can can you call out the festive trends that you're observing at consumer level so far? And how does it compare with the festive last year? If any particular categories or channels are leading, what kind of trends are you observing?

18:58 I mean, last year, were multiple inputs that went in the market around this time. Of course, there was a big GST change that happened in the market followed by a big festive push. There is no GST, of course, the same. So that one big blip that came into the system at that time doesn't exist this year. But like to like, if you compare, we change when we compare our B2C ecosystem where we are able to compare that, we are seeing double digit growth there as well right now. Got it. Thank you. That's all from my side. Thank you, ma'am. Participants are kindly requested to ask two questions in the initial round and may join the queue for more questions. The next question comes from Umang Mehta from Kotak Securities. Please go ahead. Hi, thanks for the opportunity.

19:43 My first question was on the new categories, Elan performance footwear and even sneakers, if you can add to that. How much would that have contributed in first half in terms of top line or volumes? Any color would be very helpful to understand how that business is shaping up. Since we are a reasonably large organization, whenever a new category is added, when I start comparing it to my existing base of business, everything looks small, right? But within their own rights, they are doing a reasonably good job. We would have sold over 20,000 units of apparel already in the last five, six years, timely through our retail ecosystem. We would sell over 100,000 units of Alaan as well in the financial year. So reasonably successful. And we are not going very aggressive on inventory. We are doing very clean-cut launches, being very clean on channel exclusivity on where we want to launch these products.

20:37 And we are seeing very good throughput. So there is no inventory issues of these categories. The partners are happy. There is a very strong brand communication. You would have seen the GymSup campaign that we did along with Amazon Prime during launch of that category. We are planning something similar for kids. So everything is linked to a much larger GTM and not just an ancillary category, which I'm trying to comp a new product into the market, right? So we are very happy with the results. Badminton is a very nascent launch. I mean the numbers might be small. So in the last 30, they would have sold maybe 3,000 units only on our online platform, but we are very happy because we launched only about six products there, right? So we are seeing very, very good traction. And that gives us the conviction of doubling down on these categories. So there's already a LAN 2.0 coming next month in retail. If you visit our stores next month, you will see a much more unique profile of LAN coming into our ecosystem.

21:26 Same with performance. So there's already a cricket line coming in January, right? So I mean all that would is happening because we believe these all these small categories have the right to win itself and will become small sub views in itself in the next couple of years, right? And that's what we are investing behind today. So we are not very worried, is it cycles from revenue 3%, but eventually, it will be a substantial part of my revenue in the next couple of years. That's what we're going behind. And then on all three categories that I mentioned, Performance, Land and Aperol, all three are past categories. We are doubling down and expanding the range and not slowing down. So that should give you confidence that we are very happy and the entire ecosystem is driven towards making these categories increasingly larger. Understood. Sure. Second question was on was to Nikhil. Nikhil, we've kind of heard some chatters around promoters wanting to sell, and it's been impacting the stock sentiment to some extent. Possible to clarify how are you thinking about it and is there any such plans in the immediate future?

22:33 Thanks. Hi, Uman. No. So there is no plan from the promoter family in the foreseeable future. We don't tend to say anything right now. Got it. Sure. Thank you. I'll come back in the queue. Thank you, sir. The next question comes from Bhavesh Jain from DV Investment Advisors. Please go ahead. Hello, sir. Am I audible? Yes, sir. Yes, yes. Yes. So thank you for the opportunity. It is more of a bookkeeping question from my side. So in our balance sheet within other current assets, there was government authorities of INR125 crores in FY 2026.

23:28 So it has dropped from INR72 crores in 2025. So can you just elaborate on what is this related to and how are you planning to realize this amount and in what time? So I think thanks for the question. Broadly, if you look at INR125 crore, it's largely GST input credit aligned in our balance sheet. If you I think if I split it into two, three parts, see, we are claiming refund from two states, which is HP and J and U. K. I think that itself is in this month, next month, we'll be claiming roughly INR 25 crore. This leaves the balance to INR 100 crore. Within that INR 100 crore, the INR 40 crore is Haryana, rest is different states.

24:18 But if you would have noticed in last amendment in GST meeting, the council meeting has happened, I think now the services on services also, you can claim the refund, right? That's really going to help us release, unlock some of the GST input credit. We can claim the refund in both HP and UK. The second piece is the accumulation, which was happening every month on 2 crores, INR 3 crores, that's also not going to happen. And last bit is you would have seen that our inventory is slightly at an elevated level. As it gets unlocked in next couple of quarters, this number will further come down.

25:06 Okay. So any expected time line when we can realize this amount? The overall INR100 crore you are saying or... Yes, the overall INR125 million an month? Yes, it will take good twelve, eighteen months to unlock this number. Yes. And broadly, inventory coming down, this number will come down significantly by March. Post that, this number will be will take some time to get unlocked. Okay. And do we see this figure recurring again in future? No. I think like you were like I mentioned that you would have seen that Yes, sorry, let me just come in here. I want to just clarify that this accumulated because of the services that we were availing, and there was no law before earlier to use that input credit. So now that we are able to utilize that, there is absolutely no more further accumulation. This number will only come down.

26:16 So one big chunk will come down post March after the season and the inventory comes down, and then it will steadily come down over the next six months after that. That is the plan of action from our side. Okay, thank you so much. Thank you, sir. The next question comes from Kaustubh Pawasthak from ICIC Direct. Please go ahead. Yes. Good afternoon, sir. Thanks for giving me the opportunity. So my question is on the margin trend. So if we look into the first half EBITDA margins, they were around 15%. You in the call mentioned that for the entire year, you are expecting EBITDA margins to be around 17%.

27:02 So that indicates that H2, we should expect profitability to be much better than H1. So I just want to understand what confidence is give us so that the H2 should be much better in terms of profitability, considering the fact that the raw material pressure is going to be there maybe for a quarter or two? So historically as well, our H2 margin profile has always been significantly better than H1 profile. Of course, due to seasonality of our business as well as the operating leverage are kicking because of it, right? So we believe that our quarters we are very, very geared up for a very strong quarter three and four, and that brings gives us the confidence that we will be able to sustain and deliver the 17% EBITDA reduction that we are offering you right now.

27:56 We like you mentioned, the input pressure is not going. We believe that eventually, this input pressure will also taper off and will flow into our margins at some stage. We of course, there is no funding for talking when that day will happen, but we believe that input pressure with crude also kind of going down southward for the last three days. We believe that, that should flow into the ecosystem starting sometime in January. Now there are multiple work that we are working on to ensure that our margin profile stay consistent and in line with what our performance and our duties are. So are Yes. We are not depending on the 17% guidance with respect to the raw material coming down, okay? So this is irrespective of that.

28:45 So are we looking for any further price hike in our portfolio? Or there won't be any further price? So it will depend. Right? Like, fortunately, the route has tested today as we see. So if it's a change, we don't need to take another price hike. But, unfortunately, if it does, then we'll have to take another price And sir, one clarification. In a recent comment, you mentioned that about INR 2,000 has grown by 50% and contribution is around 10%, right, in terms of volume? Is it right? That's right. Yeah. Okay. And, sir, where do you expect the contribution of about INR 2,000? You know, don't want to immediate this thing, but over the next two to three years since you have been, you know, entering into, you know, too many categories and, the categories of growth, these are most of them are categories of growth. So where do you expect this above 2,000, you know, contribution going ahead over the next two to three years?

29:51 So I mean, I would not want to put a number to it, but all the categories that we are currently focusing on, the performance, Telan, the speakers, right, all these are CSP accretive categories. The best thing about this entire direction that we're talking about is that one of the largest chunk of growth is coming from a general trade business. Our other businesses were already poised to sell higher MRP, higher your B2C businesses or your modern trade businesses were already tuned to selling a higher profile of products. Over the last eighteen to twenty four months, we have been seeing a very massive growth in the share of premium in our general trade business through a lot of product intervention as well as other trade interventions, right? So the hard thing is that, that is growing, and we believe that this the growth will continue. So I mean, I would not want to put a percentage number, but you will see a positive trend going ahead for significant period of time.

30:41 Thank you, sir. First question comes from Bhavesh Jay from DB Investment Advisors. Please go ahead. Sir, thank you for the opportunity. Just a remaining follow-up on that balance of government authority figure. So just wanted to ask why competitors don't see this amount on their balance sheet? And is it specifically related to us? So it's an interesting situation actually. In our case, there is most of our portfolio actually sits in the 5% output bracket.

31:28 And plus, we are the only or one of the very few companies that does such a high A and P spend on the brand marketing side, right? So therefore, we accumulate significant amount of input credit on the services side, which we are unable to offset because most of our portfolio sits in the 5% bracket. So that is where the mismatch sort of happened. But now that with the new GST ruling coming in, it will now offset all of that as well. I hope that clarifies. Yes. Okay, sir. Thank you so much. Just to add, we are carrying around INR 600 crores plus in our book, right? So you should read it like 15% we are already on an average basis.

32:13 15% GST we are paying while buying the material, right? So it will move in line with the inventory level what we are carrying in the books, okay? It will never get zero because always we will carry certain level of inventory for the business, right? But it will move in line with the inventory level what we are carrying for the business. Thank you, sir. The next question comes from Devanshu Bansal from MK Global. Please go ahead. Yes, sir. Hi. Thanks for the follow-up opportunity. Sir, you're sort of... Hello? Hello, mister?

33:08 Sir, there is no response. Dear participants, if you have any questions, please press star and one on your telephone keypad. Again, the question comes from from MK Global. Please go ahead. Hi. Apologies. Am I audible now? Yes, sir. Yes. Sir, if you're testing pedal on EVO expansion, so, obviously, a full store requires good amount of range as well, right? So in terms of display, etcetera. So wanted to check if you could share some thoughts around how you have sort of worked upon that, maybe walking, running, kids, slippers, etcetera, whatever new initiatives that you have taken will be really helpful.

34:03 So I mean we have just recently launched a new format of a retail identity in Roopnagar in Delhi, which was a new store identity that we've just launched, which was inaugurated by Gautam Gambhir, right? And a lot of images and videos. And in case you are in Delhi, we would love you to visit that location. It helps you understand how we are trying to communicate and talk to consumers and really bring the products to life. On the product categories that you mentioned, by default, a new retail store today will have sections of all categories that we are focusing on. The early categories of men, women, kids and within men, running, walking and lifestyle would remain the way they were. Along with that, there will be, by default, an apparel section that gets built into the newer stores that we opened as well as an enhanced finance section that brings we built. As of today, we do not have a separate section for performance yet. So we do not have a wide enough portfolio.

34:59 But eventually, once that category becomes big enough, there will be a separate section for performance footwear as well, right? Kids will get incorporated within the same segment. In case required, we will be adding certain floor units to accentuate the range that of smaller kids, which is the one to five year segment, which is not a very big category in our stores. We already present the 14 year old category within our stores quite well. In case we need more space, that will be done through a floor unit chain. So all these categories will be represented well within our retail ecosystem. Our stores' items will go a bit bigger now. We are working in the 600 to 700 square feet spaces early. Now we'll move to an 800 to 900 minuteeral square feet kind of site to be able to do justice to all these categories. Fair enough. And Oflex, so your brand philosophy around comfort value at very leisure sharp point sort of applies to apparel as well as in this is how we are sort of differentiating?

35:54 Yes, absolutely. The same values apply to apparel as well. Whatever category we do has to have very high value proposition that has been the genesis of our entire Thank you, Nathan. Thank you team for taking my questions. Thanks. Thank you, sir. Dear participants, if you have any questions, please press star and one on a telephone keypad. Thanks, everyone. As there are no further questions, we would conclude this call. In case of any further queries, please reach out to the campus Activewear Investor Relations team at ir@campusshoes.com.

37:02 Thank you for joining us, and you may disconnect your lines now.