Credo Brands Marketing Navigates Transition with MUFTI 2.0 Amidst Market Headwinds

Credo Brands Marketing Limited, the force behind the popular menswear brand MUFTI, recently released its unaudited standalone financial results for the second quarter and first half of fiscal year 2026. The period reveals a company in transition, strategically investing in its future amidst a challenging market landscape. While the top-line performance saw a temporary dip, underlying operational efficiencies and a clear vision for premiumization signal a determined path forward.

For Q2 FY26, the company reported a standalone revenue from operations of 163.7 crore, marking a 12% decline compared to 185.6 crore in Q2 FY25. The first half of the fiscal year, H1 FY26, saw revenue from operations at 283.6 crore, an 8% decrease from 309.5 crore in H1 FY25. This revenue contraction was primarily attributed to soft demand, muted footfalls across retail channels, and a temporary supply chain disruption originating from Bangladesh, which delayed product availability. Despite these headwinds, Credo Brands demonstrated resilience in its gross margins, which expanded to 57.1% in Q2 FY26 (up from 55.1% in Q2 FY25) and 59.0% in H1 FY26 (up from 56.5% in H1 FY25). This improvement was largely driven by a favorable change in the product mix, showcasing the company's ability to maintain profitability at the core product level.

Strategic Shifts and MUFTI 2.0

The core narrative for Credo Brands Marketing Limited during this period revolves around its ambitious MUFTI 2.0 transition. This initiative is designed to redefine the brand's market positioning by offering a premium retail experience, elevating merchandise architecture, and strengthening brand storytelling across all consumer touch points. As part of this strategic pivot, the company opened 5 new premium flagship stores in high-potential markets and strategic locations during H1 FY26. These stores are meticulously crafted to reflect a refreshed brand identity, aiming to create a more immersive and aspirational shopping environment for customers.

Complementing the physical retail enhancements, Credo Brands has significantly increased its investments in advertising and digital marketing. These focused efforts have already yielded encouraging results, with digital sales through the MUFTI website more than doubling year-on-year in H1 FY26. This robust growth in online channels underscores the effectiveness of their omnichannel strategy and improved digital presence. The company intends to further scale these marketing and digital investments, projecting an increase in marketing spend to approximately 6-7% of revenues for FY26, to amplify awareness of MUFTI 2.0 among potential consumers.

Operational Resilience and Future Outlook

Despite the short-term challenges, management remains confident in its long-term strategy. The temporary supply chain disruption from Bangladesh, which impacted Q2 revenue, is expected to normalize, with the associated sales flowing into Q3. The company's unique risk-free supply model, where it takes back unsold stock from channel partners and liquidates it profitably without material write-offs, ensures fresh merchandise and strengthens partner relationships. This model, while contributing to higher inventory days (217 days in H1 FY26), has historically resulted in no bad debts or inventory write-offs, a significant green flag for operational stability.

Credo Brands also continues to optimize its store network. By the end of FY26, the company plans to open about 20 new stores while closing approximately 23 underperforming older stores. This strategic pruning aims to enhance overall network efficiency and profitability, even if the total store count remains flattish for the next couple of years. The management anticipates FY26 revenue to be flattish compared to FY25, with growth expected from FY27 onwards, as the MUFTI 2.0 initiatives gain full traction. EBITDA margins are projected to remain within the 27-30% range, although profitability in the forthcoming year might be lower due to the increased strategic marketing expenditures.

Concluding Thoughts

Credo Brands Marketing Limited is navigating a crucial phase of transformation. The MUFTI 2.0 strategy, with its focus on premiumization, digital acceleration, and retail optimization, is a clear testament to the company's commitment to long-term value creation. While the immediate financial results reflect market challenges and strategic investments, the underlying operational strengths, robust gross margins, and proactive management initiatives position the company for a potential rebound in growth and sustained profitability in the coming fiscal years. Investors will be keenly watching how these strategic shifts translate into tangible market share gains and enhanced brand appeal.