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Arvind Fashions Q4 FY26: Direct-to-Consumer Momentum Meets Margin Expansion

Arvind Fashions ended Q4 FY26 with another quarter of double-digit growth, backed by a steady demand backdrop and a clear push toward direct-to-consumer channels. Revenue from operations rose to 1,365 crore in Q4 FY26 from 1,189 crore in Q4 FY25, a 14.8% year-on-year increase. Profitability also improved. EBITDA excluding other income increased to 189 crore from 159 crore, and management attributed the margin improvement to higher gross margin, better channel mix, and operating leverage.

For the full year, the company reported revenue from operations of 5,266 crore in FY26 versus 4,620 crore in FY25, a 14% increase. EBITDA excluding other income rose to 705 crore from 602 crore. Management emphasized that FY26 performance was broad-based, driven by execution across channels and brands rather than a single lever.

The channel mix continues to tilt toward direct

The most visible shift in the business is the rising contribution of direct channels. In Q4 FY26, retail remained 42% of sales, while online B2C increased to 14% from 11% in Q4 FY25. Online B2B and others declined to 11% from 13%, aligning with management’s stated intent to pivot away from B2B online.

Management said direct channels now account for 56% of sales, up 300 basis points year-on-year. Online B2C grew over 40% in Q4, and retail delivered like-to-like growth of 7.8% with overall retail growth of about 14%.

The FY26 mix showed a similar pattern. Online B2C share increased to 14% from 11%, while retail and wholesale stayed broadly stable. The company also expanded its retail footprint meaningfully, with FY26 net area addition of about 1.43 lakh square feet, and an EBO count of 1,025 as of March 2026.

Margin expansion, with a clear focus on gross margin

Gross margin expanded by 20 basis points in Q4 and 90 basis points in FY26, supported by strong like-to-like growth, reduced discounting, and sourcing gains, as per the investor presentation. This flowed through to EBITDA. Q4 EBITDA excluding other income increased to 189 crore from 159 crore, while FY26 EBITDA excluding other income increased to 705 crore from 602 crore.

Management also highlighted structural profitability improvements. It stated that ROCE crossed 23% in FY26 and called it a key performance metric. In the earnings call, management guided for another 30 to 40 basis points of EBITDA margin expansion in FY27, despite acknowledging volatility in commodities, forex, and geopolitics.

The company’s commentary on how it plans to protect margins was consistent across the deck and call: deepen India-based sourcing, double down on cost controls, and implement selective price increases where needed while safeguarding growth.

Inventory and working capital: higher inventory days, but described as controlled

A key point of investor focus was the increase in inventory. The balance sheet shows inventory of 1,605 crore at March 31, 2026, up from 1,259 crore at March 31, 2025. Inventory days increased to 102 from 91 over the same period. Net working capital days rose to 64 from 58.

Management attributed this to two factors. First, the business mix is shifting toward D2C, which keeps more inventory on the company’s books compared to wholesale. Second, the company inwarded a larger portion of SS26 merchandise before March, citing risk mitigation amid geopolitical disruptions and supply uncertainties.

The company maintained that working capital is being managed tightly, and the investor deck reported inventory turns at around 3.6 times.

Brand and portfolio actions: premiumization, adjacencies, and sharper positioning

On brands, management did not provide brand-wise revenue numbers, but it highlighted performance drivers. It said U.S. Polo Assn. led growth and delivered its highest-ever growth in the quarter. PVH brands and Flying Machine were said to have grown over 10% in Q4. Arrow was described as subdued due to a one-time model change and a weak wedding calendar.

A strategic theme in the call was portfolio expansion through adjacent categories. Management said categories beyond men’s apparel now contribute 24% of the business and grew 25% in FY26. It specifically called out footwear and innerwear as focus areas, with women’s wear expected to scale over time.

In footwear, management stated that expansion is through U.S. Polo footwear stores and the Stride format, and that Stride currently has 19 stores.

FY27: guidance anchored in growth plus operating leverage

Management entered FY27 with explicit guidance. It expects mid-double-digit revenue growth with 30 to 40 basis points of EBITDA margin expansion. It also shared a rough growth bridge: like-to-like growth of about 7% to 8%, with the balance expected from expansion and upsizing.

On retail expansion, management guided to about 1.5 lakh net square feet addition in FY27. It also noted that store closures are part of normal retail operations and guided to around 5% closures going forward.

Risks and mitigation: geopolitical volatility is a watch item

The presentation included a dedicated section on the West Asia conflict and its potential implications, including pressure on petroleum-derived inputs, rupee weakness, and rising costs in select raw materials, shipping, and capex. Management acknowledged that the impact remains unclear but outlined mitigation actions already underway, including early inventory buying for SS26, active monitoring and hedging for AW26, and deepening India-based sourcing.

Takeaways

Arvind Fashions is leaning hard into direct-to-consumer as the core growth engine, with online B2C gaining share and retail execution delivering steady like-to-like growth. FY26 combined 14% revenue growth with margin expansion, and management is guiding to sustain the trajectory in FY27 with further EBITDA margin improvement.

The key items to track are the company’s ability to convert higher D2C mix into sustained gross margin gains, manage inventory and working capital as the channel mix shifts, and execute its planned retail expansion while navigating geopolitical and input-cost volatility. */