Arvind Fashions Limited: Q2 FY26 Sees Strong Double-Digit Growth Driven by Direct Channels

Arvind Fashions Limited (AFL) has reported a robust performance for the second quarter of Fiscal Year 2026, showcasing sustained double-digit revenue growth and significant improvements in profitability. The company's net sales value (NSV) reached INR 1,418 crores, marking an impressive 11.3% year-on-year increase from INR 1,273 crores in the previous year's same quarter. This strong top-line growth was complemented by an 18.2% surge in EBITDA, which stood at INR 200 crores compared to INR 170 crores last year, reflecting an 80 basis points margin expansion. Profit After Tax (PAT) also saw a healthy rise of 27% year-on-year, reaching INR 38 crores.

The company's strategic focus on direct channels proved to be a key driver of this performance. Retail channels demonstrated a strong like-for-like (LTL) growth of 8.3%, contributing to a 14% overall growth in the retail segment. The online B2C business experienced an exceptional growth of over 50%, with direct channels now accounting for nearly 50% of total sales, a 5% point increase from the previous year. This shift towards direct-to-consumer engagement has also led to better inventory control and improved profitability. While the wholesale channel experienced a minor, transitional impact due to destocking following GST reforms, management anticipates a rebound in the second half of the fiscal year.

Strategic Initiatives and Brand Performance

Arvind Fashions Limited continues to execute its strategy of strengthening its brand portfolio and expanding its retail presence. The company added 24 new Exclusive Brand Outlets (EBOs) in Q2 FY26, contributing to a net square footage addition of approximately 36,000 square feet. The focus remains on opening marquee and larger format stores, with a significant portion of new additions coming from U.S. Polo Assn. The company aims for a gross opening of around 150 stores, largely through the Franchise Owned, Franchise Operated (FOFO) model, and expects higher net square feet addition compared to FY25.

Brand-wise, U.S. Polo Assn. delivered exceptional growth of over 20%, driven by impactful advertising campaigns, product innovation, and a refreshed retail identity. The PVH portfolio (Tommy Hilfiger and Calvin Klein) also maintained strong growth momentum. Flying Machine showed improved like-for-like growth in the retail channel, supported by specific product line curation for department stores. The company's adjacent categories, particularly footwear, witnessed robust growth of over 25%, with management expressing an ambition to double the footwear business size within the next three years.

Outlook and Future Focus

Looking ahead, Arvind Fashions Limited is optimistic about sustained growth, anticipating positive traction from the upcoming wedding season and government initiatives aimed at boosting consumer disposable income. The company is committed to achieving its revenue growth aspiration of 12-15% with accelerated growth in adjacent categories. Management also expects continued operating leverage to aid EBITDA and PAT margin expansion, along with a 100-200 basis points increase in the share of direct channels (retail + online B2C). The focus on efficient working capital management and an asset-light approach is expected to drive higher free cash flow generation and further improve Return on Capital Employed (ROCE).

The company's strategy revolves around doubling down on its strong portfolio of five brands, ensuring sharp brand positioning, differentiated products, and an excellent end-to-end consumer experience. Investments in marketing and enhanced data-backed segmentation will further strengthen consumer connect. AFL's disciplined execution and clear strategic roadmap position it for continued profitable growth in the dynamic Indian fashion market.