S P Apparels FY26: Growth holds up, while Q4 softness highlights execution timing risk

S P Apparels ended FY26 with steady consolidated growth, even as the March quarter showed a clear volume-led slowdown. Consolidated revenue from operations for FY26 rose to INR 1,578.6 crore, up 13.2% year on year. EBITDA increased to INR 217.8 crore, up 16.0%, with EBITDA margin at 13.8%. PAT grew 6.1% to INR 100.95 crore.

The contrast was sharper in Q4. Consolidated revenue from operations declined 8.6% YoY to INR 364.9 crore. EBITDA fell 17.7% to INR 44.6 crore and PAT declined 38.8% to INR 18.6 crore. Management attributed Q4 weakness mainly to softer export volumes and shipment timing disruptions, rather than pricing pressure.

What drove Q4 weakness and why management calls it temporary

In the earnings call, management described two factors behind Q4’s sequential softness: first, the after-effects of US tariff-related disruption that began in Q2 and affected booking and shipment schedules, and second, short-term disruptions in cargo movement and timing, including issues around the Strait of Hormuz. They emphasized that realizations remained broadly intact, making the quarter primarily volume-led.

Capacity utilization data in the presentation supports this: garment division utilization dropped to 64% in Q4FY26 versus 83% in Q4FY25. Management also highlighted the industry’s typical 90 to 120 day order-to-shipment cycle, implying that any pickup in orders takes a few months to show up in shipped volumes.

Financial snapshot

Segment view: garments remain the earnings anchor, SPUK improves, retail nears breakeven

The garments business remains the company’s core profit pool. For FY26, the garment division (including Young Brand Apparel, and including Sri Lanka operations as per segment note) delivered operational revenue of INR 1,421.98 crore and EBITDA of INR 230.57 crore, maintaining an EBITDA margin of 16.2%.

Young Brand Apparel, acquired in FY24 as the group’s entry into intimate wear exports, reported FY26 adjusted operational revenue of INR 321.26 crore and adjusted EBITDA of INR 49.23 crore. Management stated that Young Brand was impacted during the year as it is US customer heavy and the US tariff situation in Q2 disrupted bookings, with the company extending calibrated commercial support to maintain continuity.

SPUK, the UK-based arm created to support European clients through design and trading activity, was a notable swing factor. FY26 SPUK revenue rose to INR 87.04 crore and the segment posted positive EBITDA of INR 1.10 crore, compared with a loss of INR 3.40 crore in FY25. Management linked the improvement to operating leverage as scale improved and discussed a stronger customer pipeline going into FY27.

Retail, built around licensed and owned brands such as Crocodile, Angel and Rocket, and Natalia, remains the most visible turnaround story. FY26 retail revenue was INR 71.54 crore, and EBITDA losses reduced sharply to about INR 0.61 crore from INR 6.84 crore in FY25. Management stated that retail EBITDA was positive consecutively from Q2FY26 to Q4FY26, while also noting that retail PAT remains weighed down largely by finance costs.

Segmental revenue and profitability indicators (FY26)

Growth agenda: Sri Lanka, utilization recovery, and selective capacity adds

The presentation lays out three growth levers: growing existing verticals, expanding geographic footprint (notably Sri Lanka), and growth from acquired business (Young Brand Apparel).

Sri Lanka is positioned as a strategic manufacturing footprint to improve geographic diversification and leverage duty-free access to Europe and the UK. The company established a Sri Lanka subsidiary in January 2025 and stated a preference for asset-light expansion through acquisitions of operational factories. On the call, management said first factory operations commenced around mid-April 2026 and the plan is to scale to four factories within 12 months. For FY27, management guided Sri Lanka revenue of INR 200 to 250 crore, and indicated a longer-term potential of INR 400 to 450 crore by FY28 as ramp-up progresses.

In India, the company’s near-term growth focus remains on improving utilization. Management noted the Q4 utilization drop was disruption-driven and expects meaningful improvement from the second half of FY27 as orders normalize. They also discussed restarting Sivakasi operations that were paused during the tariff uncertainty period.

Young Brand’s Salem expansion was also discussed. Management said the project was slowed due to US tariff uncertainty and has now resumed, but meaningful commercial contribution is expected in FY28 due to hiring and ramp-up lead times.

Management outlook: FY27 guidance and what must go right

Management guided FY27 consolidated revenue of INR 2,000 crore with consolidated EBITDA margin around 14% to 15%. They also reiterated a longer-term stance that the core export garment business can sustain adjusted EBITDA margins in the 17% to 18% range.

The company disclosed an order book across divisions of roughly INR 600 crore, comprising INR 380 crore in the SPAL garmenting division, INR 142 crore in Young Brand Apparel, and GBP 6.1 million in SPUK.

On costs, management flagged raw material inflation. Cotton prices were referenced as having moved up to about INR 75,000 before easing to about INR 70,000. The company said it is working on selective pass-through to customers, ongoing commercial discussions, and internal efficiency initiatives. Forex remains a sensitivity, with management stating it typically hedges about 80% of exposure and leaves about 20% open.

Takeaways

S P Apparels exited FY26 with healthy full-year growth but a weak Q4 driven by disruptions and volume timing. The key positives were stable garment margins, SPUK returning to positive EBITDA, and retail losses narrowing sharply with EBITDA turning positive for three consecutive quarters.

The FY27 plan hinges on a second-half recovery in utilization, the Sri Lanka ramp, and better order flows as tariff uncertainty fades. The guidance of INR 2,000 crore revenue and 14% to 15% consolidated EBITDA margin sets a clear execution bar for the next 12 months.