Credo Brands Marketing Navigates Muted Market with Strategic MUFTI 2.0 Transformation

Credo Brands Marketing Limited, the force behind the popular menswear brand MUFTI, recently released its financial results for the third quarter and nine months ended December 31, 2025 (Q3 & 9M FY26). The period was marked by a challenging apparel market, with the company reporting a decline in revenue and profitability, yet demonstrating a clear strategic path forward through its 'MUFTI 2.0' transformation.

For Q3 FY26, the company's revenue from operations stood at INR 146.1 crores, reflecting a 6% year-on-year decline. The nine-month period also saw a revenue of INR 429.7 crores, an 8% decrease compared to the previous year. Profitability metrics were similarly impacted, with a Profit After Tax (PAT) of INR 7 crores for Q3 FY26, resulting in a PAT margin of 4.8%. This represents a significant year-on-year contraction, with the 9M FY26 PAT margin at 7.5%. The management attributed this performance to a muted quarter for the apparel industry, characterized by cautious consumer sentiment and lower footfalls, which led to the festive season falling short of expectations. Gross profit margins also experienced temporary pressure due to recent GST reforms, as the company consciously passed on tax benefits to customers for products priced below ₹2,500.

Strategic Initiatives and Transformation

Despite the challenging market, Credo Brands Marketing is firmly committed to its MUFTI 2.0 transformation journey. This strategy focuses on premiumisation across three core pillars: elevating the store experience, enhancing merchandise quality, and sharpening brand storytelling. The company has already opened 12 stores under the new retail identity, and initial consumer and trade responses have been encouraging, reinforcing management's belief in this strategic direction. For the 9-month period, 27 new stores were opened, while 22 underperforming stores were closed, underscoring a commitment to quality over mere scale.

Significant investments are being made in flagship stores, marketing, and digital initiatives to boost brand visibility and deepen consumer engagement. The company plans to increase its advertising and branding spend from approximately 5% of revenues in 9M FY26 to 5-6% for the full FY26, with a further increase to 8-10% of revenues planned for the next couple of years. This conscious decision aims to strengthen long-term brand equity, even if it exerts near-term pressure on profitability.

Channel Performance and Digital Growth

The company's diversified channel presence continues to be a key strength. The sales mix for Q3 FY26 shows Bottomwear as the largest contributor at 35.5%, followed by Shirts at 26.8% and T-shirts at 23.8%. In terms of sales channels, EBOs (Exclusive Brand Outlets) remain dominant, contributing 61.5% of sales in Q3 FY26, followed by LFS (Large Format Stores) at 20.8% and MBOs (Multi-Brand Outlets) at 10.3%. Online sales contributed 4.0%.

Credo Brands is also intensifying its focus on the Direct-to-Consumer (D2C) channel. By leveraging online platforms like Google and Meta, the company aims to amplify its digital brand presence. This strategy has shown visible traction, with sales from its own website growing by approximately 87% compared to the previous year. This approach is designed to meet evolving consumer behavior, attract new customers, drive traffic, and improve conversion rates, seamlessly connecting online discovery with offline conversion.

Operational Efficiency and Future Outlook

On the operational front, the company has shown improvements in working capital management, with working capital days reducing to 179 days as of Q3 FY26 from 217 days in H1 FY26. This reflects stronger collections and tighter credit discipline. The company's business model is inherently scalable and asset-light, relying on non-exclusive manufacturing partners and a healthy mix of owned and franchisee EBO stores, which helps keep fixed costs low.

Looking ahead, while demand conditions are expected to remain cautious in the near term, Credo Brands Marketing remains confident in its long-term growth strategy. The management anticipates that the improvements and changes made in merchandise, particularly from the spring/summer '26 collection, should start yielding positive results. The company plans to continue expanding its retail footprint with a measured increase in stores under the new format, focusing on quality over quantity. For FY26, the company expects its total store count to be around 431, with plans to open 25-30 new stores and close 20-25 underperforming ones in the next year. The company also guides for an EBITDA of around 25% by the end of Q4 FY26, with sustained gross profit margins.

Credo Brands Marketing is strategically positioning itself for future growth by investing in brand premiumisation, digital expansion, and operational efficiency. Despite current market challenges, the company's disciplined approach and long-term vision aim to ensure sustained value creation for its stakeholders.