Relaxo Footwears Navigates Muted Demand with Strategic Resilience in Q2 & H1 FY26

Relaxo Footwears Limited, a prominent name in the Indian footwear industry, recently announced its unaudited financial results for the second quarter and first half of the fiscal year 2026. The company reported a moderation in revenue, primarily attributed to a soft demand environment in the mass market segment and delayed purchases ahead of the GST 2.0 implementation. Despite these headwinds, Relaxo demonstrated strong operational efficiency and disciplined cost management, successfully maintaining and even expanding its profitability margins.

For Q2 FY26, revenue from operations stood at ₹629 crore, a decrease from ₹679 crore in Q2 FY25. The first half of FY26 saw revenue at ₹1,283 crore, compared to ₹1,428 crore in H1 FY25. However, the company's EBITDA margin remained stable at 12.9% in Q2 FY26 and expanded by 101 basis points to 14.1% in H1 FY26. Profit after tax (PAT) for H1 FY26 increased by 4.9% year-on-year to ₹85 crore, with PAT margins improving by 95 basis points to 6.6%. This performance underscores Relaxo's ability to manage costs effectively and optimize operations amidst a challenging market landscape.

Strategic Initiatives and Market Dynamics

The management highlighted several strategic initiatives that are crucial for navigating the current market and driving future growth. The rollout of GST 2.0, which reduced the tax rate on footwear priced below ₹2,500 to 5%, has been a significant positive. This change has enhanced Relaxo's competitiveness against the unorganized sector and improved affordability for consumers in the mass and mid-market segments. While the immediate impact involved distributors liquidating older, higher-priced inventory, the full benefits are expected to materialize from December end and January onwards.

Relaxo is also actively focusing on expanding its product portfolio, particularly in the athleisure and sneakers categories. The company is launching new products in these segments and plans to introduce premium PU products under its Flite brand. This strategy aims to increase the average selling price (ASP) and cater to evolving consumer preferences, thereby driving value growth. The company's diversified portfolio, including brands like Hawai, Flite, and Sparx, continues to be a key strength, with Sparx contributing 40% to FY25 revenue, Flite 37%, and Hawai 23%.

Operational Excellence and Distribution Reach

Relaxo's operational excellence is underpinned by its robust in-house manufacturing capabilities, boasting 9 facilities and a daily production capacity of approximately 10.5 lakh pairs. The company's wide distribution network, comprising around 550 active pan-India distributors and over 70,000 retailers/multi-brand outlets, ensures extensive market penetration. Furthermore, Relaxo exports to approximately 37 countries and maintains an overseas office in Dubai, showcasing its global footprint.

To enhance its distribution efficiency and focus on secondary sales, Relaxo introduced the Relaxo Parivaar App (RPA). This digital initiative has shown promising results, contributing to a 20% growth at the secondary level and increasing the app's share in overall sales from 50% to 60%. The company is also continuously working on rationalizing its distributor network, adding new distributors while pruning underperforming ones to optimize reach and efficiency.

Outlook and Financial Prudence

Looking ahead, Relaxo's management remains optimistic about a demand recovery, expecting momentum to strengthen in the coming quarters, supported by festival demand and the benefits of GST 2.0. For Q3 FY26, the company anticipates revenue to be either flat or experience a slight decline of 3-4%, with some growth expected in Q4 FY26. The next financial year is projected to bring much better growth.

The company maintains a strong financial position, evidenced by its net cash status. Capex for the current and next fiscal year is estimated to be in the range of ₹100-150 crore, primarily allocated towards operational efficiencies, warehouse modernization, and building its head office. Importantly, no capacity expansion is planned for the next 18 months, reflecting a disciplined approach to capital allocation during this period of market adjustment. Relaxo's commitment to cost control, operational efficiency, and strategic market positioning underscores its resilience and potential for sustained growth in the evolving Indian footwear market.