Go Fashion sees positive SSSG amid store consolidation and Daily Wear expansion

Investment View and Valuation

Motilal Oswal Financial Services retained its Buy rating on Go Fashion (India) in its July 30, 2026 results update, viewing the recovery as execution-led. The principal monitorables are sustained same-store sales growth and successful revenue migration during the ongoing store-network consolidation.

The broker believes valuations remain attractive at about 14 times trailing pre-Ind AS EV/EBITDA. Go Fashion's debt-free balance sheet and cash equivalent to about 10% of market capitalisation provide additional support. However, near-term visibility remains limited, with execution risk arising from the network transition.

Motilal Oswal's Rs 450 target price is based on 14 times September 2028 pre-Ind AS EV/EBITDA. This implies 31.1% upside from the report's CMP of Rs 343.

Q1 FY27 Operating Performance

Go Fashion began FY27 with muted Q1 FY27 revenue of Rs 2,228 million, flat year on year but 3% ahead of Motilal Oswal's estimate. Accelerated store consolidation offset an improvement in underlying demand. Exclusive brand outlet revenue rose 2% year on year to Rs 1,600 million, same-store sales growth turned positive at 0.6% from negative 2.6% in Q4 FY26, large-format-store revenue increased 2% to Rs 500 million, and online revenue grew 6%.

The company closed 66 stores during the quarter as it replaced legacy small stores with larger outlets of more than 700 square feet. The transition is intended to improve customer experience and store productivity.

Profitability and Cost Trends

Reported EBITDA declined 11% year on year to Rs 609 million, 6% below the broker's estimate, while EBITDA margin fell 350 basis points to 27.3% because of weak operating leverage. Gross profit was flat at Rs 1,401 million, and gross margin was broadly stable at 62.9%, down 10 basis points year on year.

Employee expense increased 1%, while other expenses rose 26%, including a one-off Rs 65 million store-closure write-off. Marketing expenditure increased to 2.3% of sales from 1.5% in Q1 FY26. Pre-Ind AS EBITDA excluding one-offs declined only 2% to Rs 312 million, with a 14.0% margin.

Higher other income of Rs 84 million, up 61% year on year, partly offset weaker operations. Nevertheless, PAT declined 26% to Rs 165 million.

Store Network and Growth Initiatives

Management said demand recovery was broad-based, with stores larger than 700 square feet delivering 2.5% to 3.0% same-store sales growth. Retail area fell by 7,000 square feet in Q1 FY27, but management targets 8% to 10% retail-area growth in FY27 through larger-format stores. Closure intensity is expected to moderate.

Go Fashion plans to launch 10 to 12 product categories in FY27 to address younger consumers and expand occasions beyond core bottomwear. The Daily Wear format had 15 operating stores and is targeted to reach 25 to 30 stores by FY27-end. Early unit economics indicate about Rs 1,000 monthly sales per square foot, healthy inventory turns and double-digit EBITDA margins at most stores.

Management expects inventory days to remain within 90 to 100 days by FY27-end.

Outlook, Estimates and Key Risks

The key near-term risk is gross-margin pressure, as fabric costs have risen 7% to 10%. Management is not considering price increases and expects input costs to normalise over the coming quarters.

Motilal Oswal forecasts FY26 to FY29 revenue, pre-Ind AS EBITDA and PAT compound annual growth of 9%, 20% and 21%, respectively, from a low base. The broker lowered FY27E EBITDA by 11% and PAT by 7%, while maintaining broadly unchanged revenue expectations.

• Primary monitorables: Sustained same-store sales growth and successful revenue migration during store-network consolidation.
• Execution risk: Limited near-term visibility and the operational challenges associated with replacing legacy small stores with larger-format outlets.
• Margin risk: Higher fabric costs could pressure gross margins if input costs do not normalise as expected.