MUFTI’s Q1 FY27: Steady revenue, strong gross margin, and a costly brand reset

Credo Brands Marketing Limited, the company behind MUFTI, reported a steady start to FY27, even as discretionary spending remained soft. For Q1 FY27, revenue from operations came in at ₹125.3 crore, up 5% year-on-year. Gross profit also rose 5% to ₹77.2 crore, and gross margin held firm at 61.6%.

But the quarter also showed the near-term cost of the company’s transformation agenda. EBITDA declined 14% year-on-year to ₹26.6 crore, and Profit After Tax fell sharply to ₹2.3 crore versus ₹6.3 crore in Q1 FY26. Management attributed the EBITDA decline largely to higher investment in advertising and brand building, which reached about 8.5% of revenue during the quarter.

Profitability: gross margin strength holds, EBITDA absorbs the brand investment

MUFTI’s Q1 numbers reflect a familiar pattern for consumer brands in transition. The product engine has remained solid, as seen in stable gross margins, but operating leverage weakened because of deliberate spending on marketing and retail upgrades.

The investor deck calls out a marketing spend of ₹10.7 crore in Q1 FY27 (8.5% of total revenue), nearly double the ₹5.4 crore spent in Q1 FY26. While this helps fund MUFTI 2.0, it reduced near-term EBITDA and PAT.

Management’s message on the call was direct. The company is not expecting immediate payoff from MUFTI 2.0. The Managing Director described the transformation as a long-drawn process and said that management would refrain from extrapolating short-term projections during the next couple of years.

MUFTI 2.0: premiumisation through stores, merchandise, and storytelling

The presentation positions MUFTI 2.0 as a reset built around a premium retail experience, elevated merchandise, and stronger brand storytelling. Management said the aim is to premiumise the brand, upgrade customer experience across stores, and strengthen MUFTI’s influence as consumer aspirations evolve.

A key operational lever is retail network quality. In Q1 FY27, the company opened 5 new stores across leading malls and high streets and closed 7 underperforming stores, taking the total store count to 427. The stated intent is to progressively replace lower productivity locations with stronger, experience-led stores, improving output per store while enhancing consumer experience and brand salience.

This store strategy also ties into MUFTI’s channel mix. EBOs remain the primary contributor, accounting for 61.2% of Q1 FY27 sales. MBO contributed 17.5%, LFS 11.6%, and online about 4.8% to 4.9%, with the remaining in other channels.

Product and channel mix: shirts and bottomwear lead, EBO remains the anchor

MUFTI continues to be driven by core casual categories. In Q1 FY27, shirts accounted for 46.5% of the product mix and bottomwear 39.0%. T-shirts contributed 10.8% and outerwear 4.5%. This mix indicates that even as the brand narrative evolves, the business remains anchored in topwear and bottomwear.

On digital, the deck highlights increased focus on D2C. It states that sales from the company’s own website grew by about 7% compared to the same period last year. Management also said a growing proportion of marketing is being directed to digital platforms such as Google and Meta to strengthen visibility and support engagement across online and offline channels.

At the same time, management acknowledged a trade-off. Higher brand investments can increase marketing costs and affect profitability, and the company plans to sustain marketing spend at about 8% to 10% of revenues through FY27.

Working capital and business model: “higher by design” inventory and receivables

One of the more distinctive parts of the presentation is the explanation of MUFTI’s working capital profile. The company argues that higher inventory days reflect a deliberate model rather than operational weakness. It describes a system where Credo sends fresh stock to EBO, MBO and LFS channels, and at season-end, unsold merchandise is returned to the company and liquidated through online channels and factory outlets.

Management claims that this model ensures fresh merchandise at retail touchpoints and supports premium positioning. The presentation also states that there have been no material inventory write-offs historically.

As of Jun-26, the deck reports inventory days of 74, debtor days of 118, and creditor days of 17, translating into total working capital days of 176. On the call, the CFO said the endeavour is to reduce inventory days, while the MD noted inventory days can be cyclical and the priority is to sell what is produced profitably.

The deck also provides a snapshot of operating cash flow. Cash flow from operations (post Ind AS 116) was shown at ₹132 crore for FY26 and ₹33 crore for the Jun-26 period.

What investors should track from here

MUFTI’s Q1 FY27 performance reads like a transition quarter. Revenue growth was steady, and gross margins stayed strong, but profitability fell sharply due to discretionary spending softness and higher brand investments.

The transformation strategy is clear in intent, but management is cautious on short-term predictability. The company’s stated marketing guidance of 8% to 10% through FY27 and its focus on store productivity, closures of underperforming stores, and premiumised formats give investors measurable areas to track.

Over the next few quarters, the key question is whether MUFTI 2.0 can translate into stronger same-store growth and better conversion, without permanently resetting the margin structure lower. Management said it is aiming for mid-single-digit same-store revenue growth for FY27, and that early signals from renovated stores are positive, though too early to extrapolate.

For now, the quarter reinforces one message: MUFTI is choosing to invest through uncertainty, prioritising long-term brand salience and retail experience, even at the cost of near-term profitability.