Relaxo Footwears , a leading footwear manufacturer in India, reported a 7.5% year-on-year decline in revenue for the second quarter of fiscal year 2026, amid challenges in the mass market segment and GST-related transitions. The company, however, maintained stable margins and expressed optimism about future recovery.

Key Financial Highlights

Revenue Decline and Market Challenges

The company's revenue dropped to ₹629.00 crores in Q2 FY26 from ₹679.00 crores in the same quarter last year. This decline was primarily attributed to:

• Demand softness in the mass market segment
• Delayed purchases ahead of GST 2.0 implementation
• Transition period as the market adjusts to new tax rates

GST Impact and Future Outlook

The implementation of GST 2.0, which reduced tax rates on footwear priced below ₹2,500 from 12% to 5%, is expected to have a positive impact on Relaxo's competitiveness. Management anticipates a gradual recovery starting from Q4 FY26, as:

• Channel inventory normalizes
• The new GST framework enhances competitiveness against unorganized players

Margin Performance

Despite the revenue decline, Relaxo Footwears demonstrated resilience in its profitability:

• EBITDA margin remained stable at 12.9%
• PAT margin improved to 5.8%, up from 5.4% in Q2 FY25

This improvement in profit margins reflects the company's focus on operational efficiencies and cost management during challenging market conditions.

Product Mix and Strategy

Relaxo's management highlighted during the earnings call that:

• Open footwear continues to dominate the product mix, accounting for 80% of sales
• The company is focusing on athleisure and sneakers segments
• Plans are in place to launch premium PU products under the Flite brand

Channel Inventory and Market Dynamics

The company noted that channel partners are currently focused on liquidating old inventory with higher MRPs. Management expects this process to be largely complete by December end or mid-December, after which the full impact of new pricing should be visible in the market.

Conclusion

While Relaxo Footwears faced headwinds in Q2 FY26, the company's ability to maintain margins and its strategic focus on product innovation and market expansion suggest potential for recovery. The implementation of GST 2.0 is expected to level the playing field against unorganized players, potentially driving volume growth in the coming quarters. Investors and market watchers will be keen to observe how these factors translate into performance in the second half of FY26 and beyond.

Relaxo Footwears Limited , a leading Indian footwear manufacturer, has released its financial results for the second quarter, revealing a mixed performance amidst challenging market conditions.

Revenue and Profitability

For the quarter ended September 30, Relaxo Footwears reported a revenue of ₹628.54 crore, marking a 7.48% decline from ₹679.37 crore in the same period last year. The company's profit after tax (PAT) also saw a slight decrease, dropping to ₹36.16 crore from ₹36.73 crore year-on-year, representing a 1.55% decline.

Half-Year Performance

Looking at the half-year results, Relaxo's revenue fell to ₹1,283.03 crore from ₹1,427.56 crore in the previous year, a 10.12% decrease. However, the company managed to improve its half-year profit to ₹85.06 crore from ₹81.10 crore, showing a 4.88% increase despite the revenue challenges.

Financial Highlights

Here's a breakdown of key financial metrics for Q2:

Operational Performance

The company's operational efficiency remained relatively stable, with the EBITDA margin showing a slight improvement of 1 basis point year-on-year, reaching 12.91%. This suggests that Relaxo has been able to maintain its operational efficiency despite the revenue decline.

Market Challenges and Company Response

The decline in revenue may be attributed to challenging market conditions in the footwear sector. However, Relaxo Footwears has demonstrated resilience by maintaining its profit margins and even improving them slightly. The company's ability to increase its half-year profit despite lower revenue indicates effective cost management and operational optimization.

Balance Sheet and Liquidity

As of September 30, Relaxo Footwears maintained a strong balance sheet with total assets of ₹2,870.15 crore. The company's liquidity position remains solid, with cash and cash equivalents of ₹1.33 crore and investments of ₹422.31 crore (including current and non-current investments).

Future Outlook

While the company faces headwinds in terms of revenue growth, its ability to maintain profitability and improve margins in a challenging environment may be seen as a positive sign. Investors and analysts will likely be watching closely to see how Relaxo Footwears navigates the market conditions in the coming quarters and whether it can return to revenue growth while maintaining its improved profit margins.

As the footwear industry continues to evolve, Relaxo's strong market position and financial stability may provide it with the resources needed to adapt to changing consumer preferences and market dynamics.