This article first appeared on GuruFocus.
Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Revenue grew 5% year-on-year to approximately Rs 125 crore in Q1 FY27, reflecting steady performance despite soft discretionary spending.
Gross profit increased 5% year-on-year to Rs 77 crore, with gross margins holding steady at 62%.
The company opened five new stores in leading malls and high streets, while closing seven underperforming stores, improving network quality and productivity.
Management sees positive signals from renovated and new stores under the Mufti 2.0 transformation, indicating early traction from premiumization efforts.
Marketing investments are being directed increasingly toward digital platforms like Google and Meta, strengthening brand visibility and consumer engagement across channels.
Negative Points
EBITDA declined to approximately Rs 27 crore from Rs 31 crore in the same period last year, due to higher investments in advertising and brand building.
Profit after tax was only Rs 2.3 crore, with a PAT margin of just 1.8%, reflecting significant margin pressure.
Demand moderated from mid-May, with management remaining cautious about near-term discretionary spending due to geopolitical tensions and an uncertain global environment.
Management could not provide a clear timeline for when revenue growth would outpace marketing spend, indicating uncertainty about the payback period of brand investments.
The company is in a transformation phase, with management stating it is difficult to extrapolate growth numbers for the next couple of years, suggesting a prolonged period of subdued financial performance.
Q & A Highlights
Q: Are you seeing any early signs of improvement in discretionary consumption, or is the current environment still largely dependent on the festive season?A: Kamal Kushlani, Managing Director: We certainly see some positive signals from the renovated new stores and the new retail identity we have created. However, it is a little too early to extrapolate these into projections. We are seeing positive signals and will continue to make changes, renovate stores, open new ones, and shut underperforming locations.
Q: What would be the key milestones over the next 12 to 18 months that we can see and say that Mufti 2.0 is working successfully?A: Kamal Kushlani, Managing Director: This is going to be a long-drawn process. The environment is changing and competition is intense. We are in a transformation phase that may not immediately translate into visible numbers within the next few quarters. We are making changes in product, retail identity, customer experience, and brand communication. These changes will surely impact the brand positively, but it’s a longer-drawn impact, and for the next two odd years, it will be difficult to say what exactly the numbers will pan out to be.
Q: With around 59% of the store network located in tier 2 and 3 cities, do you see the premiumization strategy working equally well across this market, or will premium stores be concentrated more towards tier 1 high street mall locations?A: Kamal Kushlani, Managing Director: Premiumization is happening all across India, not just in tier 1 cities. However, premiumization is relative. We are combing through all our stores, looking at the competitor environment in each market, and making changes to stand ahead of the competition proactively. A store renovated on Linking Road would have a different level of premiumization and expenditure than a store in a small town, where the relativity of premiumization would be tailored to that market and its environment.
Q: Do we believe the current investment is primarily strengthening brand recall among existing customers or helping Mufti acquire a younger new customer base?A: Kamal Kushlani, Managing Director: It’s both. To remain healthy and sustainable through its growth journey, we need to retain our customers and acquire new customers. There is a certain level of retention every brand can do in its cycle of year-on-year growth. So it’s both ways: to improve retention and to increase new footfalls into the stores.
Q: The presentation indicates average annual revenue per EBO of around 75 lakhs in FY26. What level of revenue do you believe the new premium format stores can achieve once they mature?A: Kamal Kushlani, Managing Director: The average annual revenue for EBO is reflected as 75 lakhs. What we are looking to do this year is to increase the same store revenue in the mid single-digit numbers. That’s what we are aiming to do for this year.
Q: Does the premiumization strategy require carrying a larger or more diverse inventory, and could this put additional pressure on working capital?A: Kamal Kushlani, Managing Director: We are looking to sharpen our inventory. It will not be a larger inventory base; it’s just going to be a change in the merchandise mix. That’s what we are looking to do.
Q: There was a 5 crore increase in revenue on a YOY basis and at the same time a 5 crore extra marketing spend. Generally, the ratio of revenue growth must be higher than the marketing spend, but it is equal. Is the management sure that by spending a higher amount on advertisement and marketing, we will achieve our target of higher revenue growth?A: Kamal Kushlani, Managing Director: I agree that it has to eventually translate to that. But remaining status quo and not doing anything is not right for the brand. We have transformed the brand, and it’s important to communicate this to existing customers since we have been existent for more than 28 years. Competition is very intense, and some competitors spend close to 15% or even higher on advertising. We are spending roughly 8% to 10% and intend to continue doing that for the longer-term growth and sustainability of the brand. It’s not just performance marketing driving immediate sales today.
Q: So within one year, can we expect that there will be some revenue growth which is higher than our ad spend?A: Kamal Kushlani, Managing Director: No, I’m unable to say that today.
Q: So can we consider we are in a surviving mode rather than the growth mode because of the higher competition from other brands?A: Kamal Kushlani, Managing Director: Every brand at its point in time and life cycle is at a different stage. We are at a stage where we are transforming the brand to stay influential and relevant in the future. We believe we are well positioned to look at the opportunity that lies ahead in terms of the aspirations of the Indian consumer. These are investments we are doing keeping that in mind.
Q: Is the demand lower or is the competition very high? What is the market condition?A: Kamal Kushlani, Managing Director: It’s both. The demand condition is muted, and discretionary spend is soft in the consumer segment. At the same time, competition is intense. It’s a combination.
Q: Our inventory days stood at 74 in the quarter. Do we believe to hold it steady in the coming quarters or is reduction anticipated?A: Rasik Mittal, CFO: There should be some reduction in the inventory days. That’s always the endeavor. Kamal Kushlani, Managing Director: This is cyclical. One season it could be a little higher, one season a little lower. As long as we can sell everything at a profit and not make a loss, we are good. We don’t have any right of the company on account of inventory.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
