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Credo Brands (MUFTI) FY26: A transition year built on MUFTI 2.0 investments

Credo Brands Marketing Limited, the owner of the MUFTI menswear brand, closed Q4 FY26 with stable operating performance even as FY26 reflected a year of transition. Q4 revenue from operations stood at INR 162.3 crore, up 6 percent year-on-year. EBITDA was INR 41.6 crore with an EBITDA margin of 25.6 percent, while PAT was INR 15.3 crore with a PAT margin of 9.4 percent.

For the full year, revenue from operations declined to INR 592.1 crore versus INR 618.2 crore in FY25. Even with stronger gross margins, profitability fell as Credo increased investments behind advertising, branding, and store premiumisation under its MUFTI 2.0 plan. FY26 EBITDA was INR 154.2 crore (26.0 percent margin) and PAT was INR 47.4 crore (8.0 percent margin).

FY26 financial picture: gross margin resilience, EBITDA pressure

Management highlighted that demand conditions in the mid-premium and premium apparel segment were challenging for much of FY26, with cautious consumer sentiment and uneven discretionary spending. Still, MUFTI’s gross margin improved, supported by product mix and execution.

The company reported FY26 gross profit of INR 345.5 crore, implying a gross margin of 58.4 percent, up from 57.2 percent in FY25. Q4 gross margin was even higher at 58.8 percent. However, other expenses increased, and advertising and branding investments ramped up as MUFTI 2.0 rolled out across touchpoints.

A notable data point from management commentary was Q4 advertising spend of about INR 13 crore, nearly 8 percent of quarterly revenues. Management also stated that FY26 brand-building spend was about 6 percent of revenues and that FY27 spend is planned to be about 8 to 10 percent of revenues. On the earnings call, the stated direction was around 9 to 10 percent, subject to market conditions.

MUFTI 2.0: store premiumisation and network rationalisation

The central strategic narrative across the presentation and the concall was MUFTI 2.0, described as premium retail experience, elevated merchandise, and brand storytelling. Management positioned this as a long-term repositioning effort rather than a near-term growth push.

Store actions in Q4 reflected a productivity-led approach. During the quarter, management said the company opened 7 new stores and closed 24 stores. As of March 31, 2026, total EBO store count stood at 429. For FY27, management guided that it plans to close about 20 underperforming stores and open roughly a similar number, implying a broadly flat store count while the focus remains on improving throughput per store.

The company also disclosed progress on the new identity rollout. As of the call date, management stated it had 31 stores with the new identity, comprising 14 renovated stores, 16 new stores, and 1 relocated store.

Capex intensity is rising with the premium format. The CFO stated that capex per store is around INR 40 to 45 lakhs, depending on location and whether the store is in a high street or a mall. The presentation also showed that average capex per EBO increased to INR 43.3 lakhs in FY26, up from INR 30.1 lakhs in FY25.

Management acknowledged that it is too early to draw definitive conclusions on same-store performance of new stores, as consumer behaviour takes time to stabilise. For Q4, management said same-store sales growth was flattish.

Channel and product mix: offline led, with faster D2C momentum

MUFTI remains largely offline-led, but Credo is pushing harder on digital visibility and D2C. In FY26, the sales mix in the presentation was led by EBOs at 54.5 percent, followed by MBOs at 26.7 percent, LFS at 10.7 percent, online at 5.4 percent, and others at 2.7 percent. Q4 sales mix showed EBOs at 47.7 percent and online at 9.8 percent.

On the concall, management said its own platform contributes roughly 5 percent of overall revenue. It also stated that online channel EBITDA is lower because it continues to be driven by discounting. At the same time, management described online as critical for discovery and omnichannel behaviour, where customers may discover online and purchase offline or the reverse.

The presentation stated that sales from the company’s own website grew by about 74 percent in FY26 versus the prior year. Management similarly stated on the call that website business grew about 75 percent year-on-year.

On the product side, MUFTI continues to be driven by shirts and bottomwear. In FY26 product mix, shirts were 38.1 percent and bottomwear was 40.8 percent. T-shirts were 12.8 percent, outerwear 6.1 percent, and other 2.2 percent.

Working capital and cash flow: structural model, still cash generative

Credo addressed its working capital profile directly, arguing that its metrics differ from traditional retail due to a deliberate risk allocation model. The presentation and management commentary stated that the company takes back unsold stock at season-end and liquidates it profitably, which increases inventory days but is positioned as a feature of its model. It also said receivable days are higher due to partner relationships, with franchisee stock backed by security deposits, and that it has not seen material bad debt write-offs historically.

As of March 31, 2026, the presentation showed working capital days of inventory 65, debtors 147, and creditors 16, with a marked working capital value of 196.

Despite the transition year, the company reported positive operating cash flow. FY26 net cash from operating activities was INR 132.4 crore (post Ind AS 116). Return ratios moderated in FY26, with RoCE at 13.8 percent and RoE at 11.2 percent.

What management is guiding for FY27

Across the call, management maintained a cautious stance on near-term demand, citing geopolitical tensions and inflation uncertainty. It stated it would be happy to see mid-single-digit growth in the coming year. Advertising and branding spend is expected to rise further to about 8 to 10 percent of revenues, and the CFO guided that FY27 EBITDA margins may be slightly lower, around 23 to 24 percent, as a result.

In stores, management expects the overall store count to remain broadly flat, with roughly 20 openings and about 20 closures, and all new stores in the MUFTI 2.0 identity. Management also stated the broader transition to the new identity is expected to happen gradually over the next 2 to 3 years, driven in part by lease renewal cycles and capex amortisation considerations.

Investor takeaways

FY26 numbers show that Credo protected gross margins and remained cash generative even as earnings declined. The company’s near-term trade-off is clear: higher advertising and premium retail capex are being used to reposition MUFTI, while the store network is being rationalised to improve productivity.

The next year, by management’s own framing, is less about rapid store count growth and more about throughput per store, brand visibility, and steady execution in an uncertain demand environment. Investors tracking FY27 will likely focus on whether elevated marketing spends translate into improving store productivity and whether MUFTI 2.0 rollout sustains the brand’s margin structure while rebuilding growth momentum.