Arvind Q3 fails to stand up to street expectations: stock tumbles 6 per cent

India’s largest integrated textile and branded apparel player Arvind Limited posted its Q3FY16 results on Thursday. Company missed street expectations as profits declined by 5.32 per cent on a Y-O-Y (year on year) basis, however revenue for the quarter in review saw a growth of 4.04 per cent.

Arvind recorded a consolidated revenue growth of 4.04 per cent on a Y-O-Y basis at Rs 2157.5 crore compared to Rs 2073.7 crore attained in the corresponding quarter of the previous fiscal. Sales were lower than analysts' anticipation due to the overall weak demand environment in the domestic markets.

On operational front EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) stand at Rs 280.5 crore as against Rs 288.22 crore achieved in the same quarter of the last fiscal, representing a de-growth of 2.68 per cent. Operational performance was poor due to increase in purchase of traded goods i.e. refers to all the purchases of finished goods that the company buys towards conducting its business, which saw an increase of 127 basis points to 14.80 per cent. Depreciation cost too went up during the quarter by 17.09 per cent to Rs 65.36 crore as company continues to spend on its expansion of new retail outlets and e-commerce venture. Margins for Q3 contracted slightly by 90 basis points. Profits after tax stand at Rs 103.3 crore as against Rs 109.1 crore, demonstrating a decline of 5.32 per cent. 

For 9MFY16, revenue increased by 5.50 per cent to Rs 6130.85 crore compared to Rs 5810.89 crore in the same period of the last fiscal. Profits saw a decline of 13.81 per cent during the 9-months ending December.

Arvind’s revenue from textiles segment during the quarter remained flat at Rs 1290.68 crore compared with Rs 1290.68 crore in the last fiscal. Brand and retail revenue in Q3 was Rs 736.97 crore, up 11.88 per cent as against Rs 658.68 crore. Revenue from real estate was at Rs 7.86 crore, a decline of 78.72 per cent as against Rs 36.95 crore in the same period last fiscal. The real estate business of the company was de-merged into a new entity.

Responding to the Q3 results, Arvind scrip plunged by more than 6 per cent in late trade to touch an intra-day low of Rs 280.50, before recovering to close at Rs 286.60 on NSE.