Arvind Fashions, a retailer of renowned brands such as Arrow, Tommy Hilfiger, and Calvin Klein, aims to become a zero-debt company within the next two years. This goal is based on the foundation of improved cash flow and a dedicated focus on franchise-based expansion, according to Vice Chairman Kulin Lalbhai.
The Bengaluru-headquartered firm has undertaken a strategic consolidation of its brand portfolio, reducing it from over 20 fashion brands to just five. Presently, the company bears a debt burden of around INR 300 crore. In a recent dialogue with analysts, the management revealed that the net debt for the company at the close of the September quarter stood at INR 476 crore.
“We embarked on a full-blown strategy 2-3 years back to create large iconic brands where we will get operational efficiencies and profitability by scaling them up,” said Lalbhai. “After the portfolio restructuring, the business is generating high return on capital employed, highly profitable and generating strong cash flow. If we achieve our business plan, the company will be debt free in two years.”
Shailesh Chaturvedi, the Managing Director and Chief Executive Officer, stated that the company intends to enlarge the footprint of its stores for each brand by 25%. This expansion aims to encompass a broader range of products for each brand, including footwear, kids’ wear, and innerwear. Additionally, the company plans to test a novel large retail format that consolidates all its brands under one roof.
Arvind Fashions retails clothing and accessories from brands such as Arrow, Tommy Hilfiger, U.S. Polo Assn., Calvin Klein, and Flying Machine. Its products are available through multi-brand apparel stores and over 1,000 exclusive brand outlets. Notably, U.S. Polo Assn. stands as the largest brand, boasting annual sales exceeding INR 2,000 crore. Arrow and Tommy Hilfiger each contribute INR 1,000 crore to the business, while Calvin Klein and Flying Machine generate INR 500 crore each in sales.
Chaturvedi stated that the company seeks to achieve an annual sales growth of 12-15% and enhance EBITDA by 100 basis points each fiscal year. It’s worth noting that a basis point represents 0.01 percentage points.
The company is testing a novel format in Bengaluru, featuring a store spanning 3,000-4,000 sq ft where all five brands are available under a single roof.
“That apart, we intend to open 150-200 exclusive brand stores every year with almost 90% of them through the franchisee route to make it an asset light model,” said Chaturvedi. “However, we will control the operations very tightly.”
Last month, Arvind Fashions completed the sale of its wholly owned subsidiary, Arvind Beauty Brand Retail, to Reliance Retail for an enterprise value of INR 216 crore. This subsidiary oversees the 26-store-strong Sephora India business. The company had announced its plan to utilize the proceeds for the expansion of its five-brand portfolio and the repayment of debts.
“Due to efficiencies, EBITDA grows much faster than revenue and net profit too will grow faster,” said Lalbhai. “We are also looking at adjacencies like footwear, kids-wear and inner-wear as a big segment. Adjacencies currently account for 12-15% of overall business but it can become 25% soon.”
Last fiscal, the company experienced a remarkable 45% year-on-year increase in revenue, reaching INR 4,421 crore, alongside a net profit of INR 88 crore. This marked a significant turnaround from the net loss of INR 104 crore posted in FY22.
