ICICI Direct: Relaxo Delivers Resilient Quarter Performance Amid Challenging Scenario   

ICICI Direct Report

Despite Q1 FY21 being significantly hampered by Covid-19 headwinds, Relaxo Footwears Ltd. reported a steady performance, depicting inherent strength of the brand and strong business model.

Disruptions owing to store closures (till first week of May) weighed on its performance. However, post lockdown relaxations, green shoots were visible with strong demand for low ticket size products like slippers/open sandals (approximately 67% of product portfolio).

Revenue for the quarter de-grew by 44% YoY to Rs 363.6 crore (versus estimated decline of 60%). On the profitability front, gross margins fell 420 basis points YoY to 50%.

However, sharp rationalisation of fixed overheads (other expenses, employee expenses down 61%, 22% YoY, respectively) arrested the Ebitda fall. Subsequently, Ebitda margins contracted merely 70 basis points YoY to 15.7%, with absolute Ebitda declining 46% YoY to Rs 57.0 crore.

Other income grew 4.5 times YoY to Rs 6.8 crore (Rs 5.1 crore pertains to lease rent waiver). Effective tax rate came in at 25% vs. 35% in Q1 FY20.

Ensuing profit after tax declined 51% YoY to Rs 24.2 crore. The overall performance was resilient considering the adverse market environment.

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