Relaxo Footwear drops after weak Q3 performance

Relaxo Footwears slipped 3.39% to Rs 777.55 after the company reported 57% drop in net profit to Rs 30 crore in Q3 FY23 from Rs 70 crore in Q3 FY22.

Revenue from operations declined by 8% YoY to Rs 681 crore during the quarter. It was impacted by the subdued demand in mass segment articles and the higher volume/value base in the corresponding quarter in FY22 due to change in GST rate with effect from1 January 2022.

EBITDA in Q3 FY23 was Rs 72 crore, down 41% from Rs 122 crore in Q3 FY22. EBITDA margin was 10.6% in Q3 FY23 as against 16.4% in Q3 FY22. This was due to aggressive price corrections in open footwear as well as the liquidation of high cost inventory in the pipeline in the current quarter. However, the margins witnessed an increase on a Q-o-Q basis.

Ramesh Kumar Dua, managing director, said: The company has reported a modest performance in Q3FY23. In spite of subdued demand due to the continuing inflationary pressures on the consumers, the Company showed marginal improvement in volumes on Q-o-Q basis. The volume growth was primarily supported by price corrections undertaken.

Market environment remains competitive & challenging. The company made price corrections to counter the same. While we have started seeing the effect of the same on volumes, its full effect will come into play from Q4FY23 onwards.

Once the major portion of the high-cost inventory gets cleared from our distribution channels coupled with the business showing signs of improvement and raw material costs stabilising, we expect improvements in margins while regaining the market share in the quarters to come.

We also anticipate that our closed footwear segment will continue to show healthy growth momentum as wholesale distribution channels and online penetration improve.

Relaxo Footwears is engaged in production of Hawaii slippers, light weight slippers, canvas shoes, PVC footwear etc.

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