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Ladies and gentlemen, good day, and welcome to the Go Fashion (India) Limited Q4 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Gautam Saraogi from Go Fashion India Limited. Thank you, and over to you, sir.
Good evening, and a warm welcome to everyone present on the call. Along with me, I have Mr. R. Mohan, our Chief Financial Officer; and SGA, our Investor Relations Advisers. I hope you all have received the investor deck by now. And for those who haven't, you can view them on the stock exchange and the company website. At Go Colors, we continue to deliver robust financial performance despite a challenging demand environment. During Q4 FY '25, revenue surged by 13% Y-o-Y to INR 205 crores. EBITDA stood at INR 62 crore, a growth of 16% on a Y-o-Y basis. Q4 FY '25 witnessed a recovery in SSSG, which stood at 2.1% for Q4 FY '25. This performance is in line with our efforts on improvising business efficiency and implementing store cost control measures.
For FY '26, we -- our aim is to improve our SSSG and achieve positive SSSG in FY '26. Over the years, we've evolved from a leggings and Churidar-focused brand into a comprehensive bottom wear brand. This transformation is reflected in the growth of our average selling price, which stood at INR 769, mainly driven by the shift in our product mix. We have maintained a strong full price ratio at 95.4%, highlighting both strength of our pricing strategy and continued acceptance of our products in the market. Our strategy continues to center on positioning ourselves to be the go-to destination for all of women's bottom wear needs by offering a wide range of products at accessible price points and catering to a diverse customer base.
Moving to operational metrics for Q4 and FY '25. In FY '25, we added a net total of 62 new stores, bringing our total store count to 776. Some of our planned store openings in Q4 FY '25 were delayed and shifted to the next quarter due to a store getting prepared and some delay in that. We have already mapped out and finalized over 30 stores in Q1 FY '26, ensuring that we are well positioned for a strong start of the year. During Q4 FY '25, we also focused on rationalizing our store portfolio and all our store closures have been completed. With this closures done, we aspire to do an addition of net -- on a net basis, 120 stores annually starting FY '26.
During Q4 FY '25, we achieved a low single-digit SSSG of 2.1%, while the broader environment remains somewhat challenging. We are beginning to see some early signs of gradual improvement in demand at the ground level. Encouraging by the trends, we believe the momentum will continue to build and we expect further strengthening of demand as we move forward. Our teams remain focused on delivering superior customer experience and driving operational excellence, which positions us well to capture the emerging opportunities. Our advertising and promotion spend as a percentage of revenue stood at 2% for FY '25, which is in line with our previous commentary.
Coming to our working capital and cash flows. Our disciplined inventory management has resulted in maintaining our inventory days at 102 days. We believe that this is -- there is room to optimize this further by a few days, which will contribute to a stronger balance sheet and support long-term sustainable growth. I'm pleased to share that we successfully achieved our target of converting 50% of our pre-IndAS EBITDA into operating cash flows during FY '25.
As we look ahead, we are confident of sustaining this performance driven by disciplined approach towards inventory management and our strong focus on working capital efficiency. I'm also pleased to share that we are on track to open our inaugural store in the Middle East in partnership with Apparel Group. We expect our first store to open either by May end or by June end, marking an exciting milestone in our international expansion. This store is going to be planned to open in Silicon Central Mall in Dubai.
Now coming to new business update. Our main business remains firmly rooted in women's bottom wear, and we continue to lead this category with a strong focus on quality and customer satisfaction. Our customer recognizes Go Colors as a very core functional and everyday wear brand. And now we take this opportunity to extend Go Colors to new categories of women's everyday wear and few categories of men's everyday wear. These will include products like basic kurtis, shirts, dresses and all-day everyday casual clothing of women, as well as selected men's apparel such as polo shirts, chinos, loungefit and casual shirts.
These products would remain functional in nature and are designed to stay in fashion for long periods of time with minimal prints and timeless style, distinguishing them from fast fashion trends. These new categories are being introduced as a pilot with only a carefully selected range of SKUs. We would be looking to have 15 stores of this new concept in the first 6 months phase and 10 stores in the second 6 months phase. Since some of our existing bottom-wear stores are already above 1,500 square feet in size, we will be using the first 15 stores of our existing network by adding these new categories in these stores, with Go Color seamlessly extending to become a one-stop destination for all everyday clothing.
The objective here is to increase the wallet share of customers who already visited -- who already visit for our bottom wear by offering them complementary products inside the store. We are utilizing our existing store network for these new offerings under the same brand, ensuring a seamless customer experience. While we are in the early stages of this pilot, we continue to be optimistic and bullish about the potential of our main business, which is our bottom wear business with 120-plus new store expansion in the coming FY '26.
We look forward to evaluating the success of these offering and opportunities that may unlock in the future. Our ongoing investments in technology and product innovation continue to keep us ahead of the industry trends. As the broader industry begins to recover, we are well positioned to deliver strong performance in the years to come.
With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for an update on Q4 and FY '25 results and financials. Thank you.
Thank you, Gautam, and good evening, everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First of all, I'll give you the financial highlights for Q4 FY '25. Our revenues for the quarter stood at INR 205 crores as against INR 182 crores in Q4 FY '24, a growth of 13% Y-o-Y. Gross profit stood at INR 132 crores, a growth of 14% Y-o-Y, with a GP margin of 64.3% for the quarter.
Our EBITDA for the quarter stood at INR 62 crores as compared to INR 54 crores in Q4 FY '24, a growth of 16% Y-o-Y. Our EBITDA margin stood at 30.5%. Profit after tax for the quarter at INR 20 crores and witnessed a growth of 52% Y-o-Y. PAT margin stood at 9.7%. Coming to the FY '25 performance. Revenue stood at INR 848 crores in FY '25 as against INR 763 crores in FY '24, a growth of 11% Y-o-Y. Gross profit stood at INR 537 crores, a growth of 14% Y-o-Y, with a GP margin of 63.3% for the year ended FY '25. EBITDA for FY '25 stood at INR 268 crores as compared to INR 242 crores for FY '24, a growth of 11% Y-o-Y. Our EBITDA margin stood at 31.6%. PAT for FY '25 stood at INR 93 crores as compared to INR 83 crores in FY '24, a growth of 13% Y-o-Y. Our PAT margins stood at 11%. RoCE and RoE excluding Ind-AS impact as on FY '25 stood at 19.2% and 15%, respectively. Cash and cash equivalents, including mutual funds and fixed deposits stood at INR 249 crores as on 31st March 2025.
With this now, we will open the floor for the question-and-answers.
The first question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on good pickup in LFS channel. Gautam, all through the weak demand environment that prevailed over the last couple of years, right? So we remain focused on this women bottom wear category. And now when we are seeing some green shoots, we are experimenting with new categories, including menswear as well. So I just wanted to sort of dive deeper into the thought process behind this experiment. And do you also fear some loss of brand positioning or shopping experience for women because of this?
See, I think, look, the idea here to do an experiment is not to dilute the brand, obviously. We feel the brand can get very well extended to other essential categories of women and very few categories of men, see, even the experiment what we are doing, 80%, 85% of our product range what we are introducing are going to be in the women's space. There are some complementing products of menswear, which we see can sell very well with the women's wear. So the positioning here is to create a essential everyday wear type of clothing store, like I'll give you a closest example. So how you have like a Uniqlo internationally where a Uniqlo resembles functional fashion, round deal of product for women and men. We are trying to create -- we are trying to look to create that in the women's wear space with a very small experiment in the men's wear space. So the positioning is going to be more from a perspective of how a Uniqlo is internationally, make that more like an Indian Uniqlo version to cater to the Indian customer with more everyday wear and functional clothing. So our idea is not to become a fast fashion brand. It's going to be on the thesis of it being core functional, high quality and very sharp pricing. So the pricing also what we are targeting for this is going to be between INR 800 and INR 1,800.
Interesting. Gautam, so you have mentioned that in the first year, I guess, the plan is to add about 25-odd stores or maybe experiment this in 25-odd stores. But eventually, going beyond FY '26, so what's the exact plan? I mean do we plan to open larger stores?
Well, Devanshu, right now, it's just a pilot. So for me to give a guidance on this is very difficult. But because we are doing it as a pilot, we feel a 25 store pilot will do justice. So luckily, what happened when we were analyzing how much square feet we would require for this concept. In our current network of stores, we have about 15 to 20 stores, which are greater than 1,500 square feet and are close to 2,000 square feet. So the best way we felt of doing piloting was that those stores are already doing very well, adding categories in those stores, the customer footfalls are already very strong. So in the first pilot, we are doing it in our existing network of stores, which are greater than 1,500 square feet, so we don't incur rental costs. And based on the pilot, we will strategize on how to go and take it in the future.
Understood. And sir, last question on this. Are you also sort of exiting from some of the women bottom wear categories to free up space for this? Because obviously those 1,500, 2,000 square feet stores.
No, no. Our bottom wear categories in those 15 bottom wear stores that are going to be adding categories, the bottom wear size will nowhere reduce. That will not get diluted.
Understood. Sir, last question from my end. EBO SSSG has definitely picked up. But in some sense, it has been led by improvement in realizations, right? So almost like 2.3% gain in realization and 2.1% increase in SSSG. So exactly, I wanted to understand and then volume growth remains muted. So what are the steps that we are taking to sort of improve the volume growth at the same-store level?
See, I think, look, we have seen some traction in Q4 and January and February were relatively good months. And even March -- the second half of March also was good because we had early Eid. So I think look, the consumer sentiment is improving. So this is the first time we are seeing some decent low single-digit SSSG from a positive perspective. I think in the coming quarters, as demand keeps improving, the value SSG will improve and even the volume SSG will improve. So I think it's a matter of time when this has improved, even the other will improve as well.
Understood. Any initial signs in April, sir? So far, are you seeing some improvement versus what it was?
April right now, from what I see, April SSSG has been flattish. So we are expecting May and June to be good, but April has been a little slow.
The next question is from the line of Gaurav Jogani from JM Financial.
Sorry, Gautam, but I missed on this new category thing that you mentioned, what all things you would be introducing. If you can help me out with that again, sorry.
Yes, yes. So, Gaurav, basically, see, what we are doing is, we are entering into the women's tops wear space by doing basic tops, basically basic kurtis, basic shirt, basic dresses. And the prints and the basically the design of the clothing is going to be more timeless. For example, it's not going to be fast fashion. So here, the prints and the styling is going to be more core and functional in nature. So we are introducing some new categories which are more everyday wear for women, and we're doing some selected styles for men's wear. So the idea here of positioning Go Colors is more from the perspective of it becomes like a one-stop destination for functional everyday clothing, like the closest example I can give you like what Uniqlo has done internationally, right? Uniqlo has done a fantastic job internationally by attracting customers and giving them very solid [ hopeful ] functional products where it's not linked to fast fashion. So we are also trying to benchmark them and trying to create like a Indianized Uniqlo version of everyday wear. So that's the thought behind it. But the idea is obviously to test it and do a pilot in 15 to 20 stores, like I mentioned. And if the pilot does well, then we will strategize how to take it further.
Gautam, my next question is with regards to that the Reliance a credit note that you received in Q4, how much of that has just contributed for this in this quarter, you can help us with that?
Last year -- Last year during the same quarter, we had received a credit note of about INR 8 crores. And this year for quarter 4 same quarter, we have received INR 11 crores. So the delta difference between this quarter and that quarter would be about INR 3 crores.
And this would be recognized in the LFS revenue, right if wanted?
Yes, yes, of course, this will be part of the revenue in that, yes, correct.
And Gautam, lastly, what would be your guidance in terms of the LFS additions because this year also the LFS additions have been also been lower. So going ahead, what kind of LFS additions that we can see?
See, it's a little hard to say right now, see, for EBOs, we are able to predict, Gaurav. But I'm guessing if I have to be conservative, I think about 100 additions in the coming FY '26 on a conservative basis because I have visibility for 100. It might be more as well. But because LFS expansion, we don't have a control on LFS expansion to a very large extent. So on a conservative basis, I would say about 100 stores we should be adding in FY '26.
And, Gautam, just lastly on the MBO part...
100 stores is more from a gross perspective. See, again, we don't have a control on certain shutdowns across certain [indiscernible]. So on a gross level, we see our self adding about 100 stores in LFS in FY '26.
And Gautam, just lastly on the MBO bid as well. Last quarter, we did mention that we have hired someone for this position. And how is the progress on this aspect?
Well, business has been doing good. In fact, we are seeing a 30%, 40% jump on a Y-o-Y basis in MBO business. But of course, the base is very small. So the jump would be very -- would look very large right now. But right now, we are more in the stages of appointing distributors, making the infrastructure ready. So I think we have actually tied up with some very good distributors across South and North who are actually doing for other large brands as well. And I think in the coming quarters, we see good traction in MBO.
And would this lead to any sort of jump in the working capital? And what would be the working capital cycle here?
No. See, working capital cycle, I don't see a big change because even though we are going to be working on credit for certain distributors across giving that credit, we are also taking our deposits from the distributor at the same time. So if we net off the deposit against the receivables, I don't think it's going to be a very heavy working capital business.
The next question is from the line of Ankit Kedia from PhillipCapital.
Gautam, just on the new category addition in the stores, from taking it from pilot to expanding it across the stores, what will you monitor in KPI terms to consider it as a success to take it to the next level? What are the key monetary rules for us and for you?
Ankit, see, right now, very difficult to say because, see, currently, we have been working in a template where we used to take an average of 400, 500 FFT, 30% EBITDA business with a ROI of 15 months. This is the bottom wear template, right? So as far as this new concept is concerned, which will require space of more than 1,500 square feet, it's very difficult for me to give a KPI guidance right now. Our obvious idea is to first at least generate decent good amount of sales per square feet and the store should be better than EBITDA breakeven. So I think it is something which we will also learn over the next 7, 8 months as we open those new concept stores. So for right now for me to have a KPI guidance, it's a little difficult. It is something which we will also learn as we keep opening.
Given that these stores are already functional, assuming the SSSG and everything remains the same and there is no change, right, in the business throughput despite adding new categories, will you consider that as a success or no?
See, ideally, I would like to see those stores at least see, suppose, for example, I'm giving a hypothetical example, right? Suppose a store is doing INR 10 lakhs a month, and I'm adding these new categories. So then I would see, okay, is it doubling my sales? If it is doubling my sale or my sale is even increasing by 50%, 60%, then I know we are heading in the right direction. See, because I'll tell you what happens, see, when we are going to be doing this product introduction, we are also going to make mistakes, right, because we are bottom specialist. Now when we are getting into top wear, we will also learn we will make mistakes. So I think as initially, even if we are able to generate the 30%, 40% additional sale over our current number of that existing store, I think then we are heading in the right direction.
But this store will also have the existing inventory, right? So current -- if the density of the store is x, so you will be stuffing the stores with higher inventory so that the current business remains at...
Actually, what happened, Ankit, see there were many stores because of location, we have selected stores and the rent was in our budget. So we happen to have also 1,600 square feet stores in our roster. In those very large stores, I was only using a certain section for my inventory, I was not using the balance section. I was keeping the balance section more as a storage for -- as like a back-end storage for staff room and all those other things where I was not using as part of storing space. So now what I'm doing is, I'm just expanding the space for which I'm already paying the rent and keeping inventory there. So my bottom wear inventory and size don't get diluted at that particular store.
Understood. Second question to this is, typically in the menswear and the womenswear, you need separate trial rooms, right?
Correct.
So from a CapEx perspective in that store, how will that look and feel change? How much more CapEx needs to be done to incorporate menswear? And what will -- I can understand womenswear, it can seamlessly be on the same floor. From a menswear perspective, will that store have 10% inventory, 5%? Do you expect men to come in or women to shop for men from that inventory?
Yes, See, I'll explain to you. So I'll tell you, 80% of our new styles what we are launching, 80% to 85% would be around womenswear because that is our forte, that is our fil. Now why do menswear because we feel that these products of menswear are complementary and can sell very well. So here by keeping that 15% inventory that 15% or 13% inventory of men, we are also seeing that, okay, look, a lot of our women customers are accompanied by men. So I think it will be a good complementary product to sell with womenswear. See, our overall vision is to make a one-stop destination as far as everyday wear is concerned. So -- but right now, I can't skew my inventory where I have 40% or 45% men because men is not my specialization. So that's why I'm keeping myself to my specialization and having 85% women's inventory and having only about 15% to 13% of men's inventory.
Now coming from a CapEx perspective, yes, we would have to undergo additional CapEx, not only for men, even for the women's space because we are extending the space in the existing store, which we had blocked, right? The showroom space was less, the additional space was blocked. So when we are going to be doing the additional space, CapEx, I think, to the extent of INR 2,000 to INR 2,500 per square feet, we will be incurring CapEx of that additional space. So for example, if I'm having a store which is 1,500 square feet and currently, I'm using 600 square feet for bottom wear, the balance 900 square feet where the CapEx is not done, I'll be incurring, say, INR 2,000 to INR 2,500 per SFT for that additional 900.
Understood. And from a provisioning perspective, right? So today, we are 95% full price retailer. Going forward, given that there will be some fashion element and Uniqlo does discounting of the unsold inventory. So how will you take that -- do you see that change for top wear...
Sorry to interrupt Mr. Ankit Kedia.
No, no, Madam, I'll just complete this question. This is a very important question, please. Yes. So from a provisioning from discounting perspective, because top wear is different, competitive intensity is very different there compared to the bottom wear, right? You are actually head on competing with Jockey and others who also have similar functional products at a sharp price point. So how do you -- how does that move your gross margins and provisioning and discounting?
Yes. See, from a full price sales ratio, Ankit, your point is very well taken. Even I don't visualize that the full price sales ratio will be more than 95%. It might be for all you know. But today, as of now, I don't know what will be the full price sales ratio. Right now, based on the research what I've done, I know it is a very high full price sales percentage category. But whether it is going to be 80%, whether it's going to be 85% or whether it's going to be close to 90%, that is something we will know only after the pilot. Here, I'm keeping my fingers crossed because the full research what I have done, the results show that this is a very high full price sales category. Only once we implement it, we will know it. So from a provisioning perspective and full price sales ratio guidance perspective, once the pilot is done, I'll be able to probably answer more questions maybe in the second quarter.
Now coming to what the idea behind this, right, competing with other people like other brands like Jockey and like the good brands you mentioned, right? See, the idea here is simple. Because my stores are having footfall of women, they are coming, they are buying in bottom wear and from the consumer research I've done, those women are also seeking to buy top wear from Go Colors. So for me, the store which is already having very high footfall for bottom wear purchase, if I keep top wear as an adjacent category in that particular store, for me to sell then and there to the customer is not going to be so difficult. If I was launching a separate identity for top wear, then driving footfall in that new store is very difficult because then you are competing with others.
Here, I am basically capitalizing and tapping into my existing customers who are walking in for bottom wear. So it is a -- I would rather put it that way. It's a much safer pilot this way rather than me creating a separate identity for this concept.
The next question is from the line of Shyam Sundar Sriram from Franklin Templeton.
Gautam, on this new category from our earlier conversations as well, typically, in women's wear the top wear product is a fashion product, how does it align with our low fashion, everyday essential philosophy that we are trying to pilot here? Any thoughts on that?
Yes. So, see Shyam, definitely top wear is fashion, right? Going back to my earlier commentary on the top wear being fashion, the bottom being core. So the top wear is fashion. I don't say no. But the kind of fashion we are trying to do is more everyday fashion where the entire thing is more -- is more -- is not seasonal. It's not fast fashion. For example, if I'm introducing a print, it will necessarily not go out of fashion for the -- I say maybe for the next 12 months or 15 months as I speculate. It will not be as fast as 3 months or 4 months. So right now, selling those basic tops with the bottoms, I think it's a good complementary product, which we feel customers will buy. This is actually based -- this actually entire thing started on because of the consumer research we have done. A lot of consumer research is when we did with our consumers, a lot of consumers said that why don't you introduce basic tops, why don't you introduce more core products in other categories? And from there only we got this idea.
So we are quite hopeful that this should sell well with bottom wear. We don't -- see right now, we also don't have many answers, frankly. So you will hear me repeat the same thing again and again, but we are quite positive that it should sell with bottom. wear.
Sure. And from an organization perspective, in terms of design teams, are there any areas that we want to build upon to make this pilot more successful? How do we see that from an organization development needs?
See, from an organization perspective, Shyam, we have strengthened our product and design development team. So we have a separate team within our product and design team, which is working only on this. The bottom wear team still continues to be separate because at the end of the day, when we are doing this pilot, we cannot dilute our main business, which is a fast-growing business. So the bottom wear team and the design team is separate and for this pilot, it's a separate team. So from a team perspective, we are very well equipped. This is from a product team. From the other operational teams, the teams are going to be common for this and for our bottom wear. So we don't see any dilution either way.
And just one other point. This LFS revenue seems to have grown very well in this quarter. You made some comment there, I think I missed it. Can you just repeat that? Sorry, I...
See, largely -- see, the question actually what the earlier person had asked was different. So basically, what has happened is, we get a credit note from Reliance, our largest LFS partner every quarter 4. And we have been having -- we have been getting that for the last 3 years. So the question was that last year, we had got a credit note of INR 8 crores. This year, we got a credit note of INR 11 crores. And obviously, this credit note gets added on to the LFS revenue for that particular quarter. That is what the question was actually.
So INR 11 crores is the credit for this quarter?
Credit note which has come in, in quarter 4, which was last year INR 8 crores in quarter 4.
So the difference is INR 3 crores. Got it. Got it. Just one last question on the network side...
Sorry, just one second, yes, the other -- one of the reasons why the LFS growth is also large because on a net basis, through the 12 months, we've added about 197 stores, if I'm not wrong. And because of that 197 stores, the growth also will show higher because the minute I send inventory to these 197 stores, the sale gets booked in my books as debtors.
Correct. Correct.
So that is another reason why the LFS growth will show higher than EBO growth.
Yes. Just one last question. On this MBO network, you did talk about appointing distributors and having a slightly different network approach. This -- while this is very good -- this is slightly a deviation from our network strategy in terms of owning a large part of the network and having LFS as a more complementary channel. How does this -- having distributors and having a very different MBO channel gel with our overall network strategy? Will it create any channel conflicts? That is the other part of...
Correct. So, Shyam, I'll tell you what you're saying is absolutely right. And this was my earlier belief that we have to be very channel disciplined. See, the reason why we are doing MBO selectively is because we feel it's like LFS, MBO also is a very good customer acquisition channel. So what we are planning to do is, we are qualitatively going to supply only to the very large key MBOs, which refrain from discounting and where the discounting control will be in our hands. So only to those very cream MBO stores, we are going to be supplying through distributors. And those MBO stores houses many customers who are very loyal to those particular MBO stores only. So by that, we are basically exposing our brand to a much larger customer database out there who eventually will actually see themselves also shopping in the EBO by after getting acquired in an MBO.
So here, the idea is not to go and supply the product range to every MBO store in the city, but only give it to the cream and the quality ones.
No, sir, say like Pothys, for example, something like that.
Example, Pothys, Naidu Hall, Jeyachandran, like a few names, right, who are very disciplined in their discounting, but have a very strong loyal customer base.
The next question is from the line of Sameer Gupta from India Infoline.
Sir, firstly, a little deviation from other participants. Let's come back to the core business. So store addition this year, again, guidance is 120 to 150. Now I understand there were large accelerated store closures in the last 2 years. But even if I adjust for a gross -- on a gross basis, there are around 100 store additions. Now unless the overall demand environment has changed materially, what is the confidence of this 120 to 150 store additions in FY '26?
So Sameer, no, very rightly you asked. In fact, I should have clarified this earlier. See, actually, see, if I look at our openings, right, so we have had 104 gross openings. And our target was about 150 to 150. So we've fallen about 15% to 20% short than our guidance. I think, look, this year, it was -- some projects got delayed, and that's because of that reason, the 104 was a lot lower than the 120. That was one reason. And also it being a tough year, we were also a little more careful in our business development approach. But I also have seen that the momentum has picked up. We have a good number of stores opening in Q1. So we have more than 30 store which are under fit out and should open in Q1. So I think I'm quite -- we as management are quite confident that we will open a bare minimum of 120 and maybe go even higher as the opportunity comes by.
Now as far as consolidation is concerned, I would like to really clarify on the call that we are done with all our consolidation. We don't see any more consolidation in this year, this coming financial year. Maximum, what will happen in the normal course of business, if we shut 4 or 5 stores, maximum, that will happen, but large consolidations of the nature of what has happened last year will not happen this year at least.
This is very helpful. One last question, if I may squeeze in. Now again, coming back to the pilot that we are talking about. So this is a pretty large step in going into a category with its own complexities. Is it like an acknowledgment that we need to diversify. We are a single format company. And as this is getting more mature, 776 stores across 180 cities already, it is probably time to start incubating new categories, and this is just a start here. So I mean, what is the trigger here?
See, I'll tell you, Sameer, honestly, I think as management also, we fundamentally believe that it's better to experiment and do new things when your main business is growing well and doing well. So our main bottom wear business, if I keep the recent demand challenges aside, we've had good growth in our main business. We've added good number of stores. Operational metrics are in track. And the business is generating very strong operating cash flow. When the balance sheet hygiene is so good, where the operating cash flow is much higher than the CapEx and we are generating free cash flow and main business also is doing well, I thought it's a good time to do experiments, see because if I do experiments, right, I will succeed, I will fail. Maybe if I try 2 things, maybe one thing will work, one thing will not work, right?
By the time we reach some sort of maturity in the bottom wear business in the coming years, maybe something else new will become bigger. So I feel looking at the financial metrics of the business and how it's doing based on cash flow and growth, I thought it was good to do some experiments, but calculated experiments. See, what we are doing right now, it has been in the pipeline for the last 1 year. We have given it a lot of thought. We have built a team that knows how to execute this. So you understand when I built a team for top wear, it was not my existing bottom wear designers or product development people I've used to make top wear. I've hired a separate team and expertise in my product development team. So I'm doing it as a very different exercise rather than mixing it with my bottom wear exercise.
So it's been -- it's very calculated, and I think it should succeed. But yes, when we are doing experiments, certain things will succeed, certain things will failure, and I think we'll have to take it. And I think it should -- the pilot should do well over the next 6 months to a year.
Okay. So let me flip the question a little. In the current scenario, you have 120 to 150 store additions in Go Colors, the prime format and also the added complexity of managing a pilot. Is there enough fund internal accruals, et cetera, to fund these new developments or overall developments? Or do you also foresee taking some debt from the market to fund these projects?
No, no. Sameer, see, actually, if you see our balance sheet is very well funded. If you see this year, we have generated INR 76 crores of pre-Ind AS operating cash flow, and we have generated INR 50 crores of free cash flow. So here, the investment, what I would be doing in the pilot is not going to be very high. It's going to be on the inventory part and on the CapEx part. And I think the operating cash flow of the business is strong enough to fund this pilot.
But [indiscernible] free cash flow, right?
Sorry?
We should look at CapEx including in this operating cash flow, right? I mean that is also...
Yes and the business is generating -- so the business is generating -- this year, the business has generated INR 50 crores of free cash flow, which is much higher than what I would be investing in this pilot. Let me put it that way. So even after doing this pilot, there would still be free cash flow.
And the 20, 30 stores extra that you would also want to open in your Go Colors even, you will still be net cash you're saying?
Yes, yes, it should be generating. Our cash flows are very strong. So even after considering this pilot, we should be in a position of generating strong free cash flow. Just one thing to clarify here, Sameer. The 120 to 150 stores what guidance what I'm giving you is for the prime Go Color. In my existing stores, I'm doing the pilot of the 15 stores, [indiscernible] be a separate addition to the 120 to 150.
But eventually the pilot will also become more meaningful, right? So that..
Yes, so -- but that, I would be able to take a call only after what is the result of the pilot. If the pilot does well and we see we want to add stores, that will be -- that might be additional. But right now, we are focusing only on the pilot.
Got it. But eventually, if it is successful, let's say, you would require funds, right? I mean that's a normal assumption.
No, I think the cash flows are strong enough, Sameer. I don't think we will have a problem. Fair enough, fair enough. This is okay. I'll connect with you offline and I will connect with you offline and explain to you on this, Sameer.
The next question is from the line of Nikhil Garg from BNP Paribas.
Many congratulation on a good set of numbers. Three questions from my side. I'll just ask all 3 and then you can answer. One, working capital side, there is a good increase in trade receivables. So if you can throw more light on it? Second, what is our differentiation strategy for your category expansions like mens wear and all, like why would anyone come to you? Is it similar to colors, right, that you have more color options? Or what is the exact strategy which will bring customers to your store? And third, if you can throw some light on the competition, I had heard from the market that Aditya Birla [ ATLC ] 11, which was their bottom wear stores, those have a lot of -- those stores have closed in Northern India. So if you can throw some light on the competitive intensity within the bottom wear if anything?
Sure. On the first question, on the working capital, so the debtors have actually gone up by about 6, 7 days, Nikhil, which I think will stabilize in Q1 because we've added about 70, 80 stores in Q4 also. And through the year, we've expanded into Shoppers Stop and Lifestyle. So the debtors is slightly higher because the secondary sale is yet to fully kick in, in those stores to the magnitude of the primary sale. So I think this debtors will stabilize in Q1 or maximum by Q2. So I don't see that from a working capital concern, a big concern.
From an inventory concern perspective, see, we had about 102 days of inventory in last March. And now also, we are at about 102. Usually, our inventory spikes a little bit in March because of summer season. But through the year, we see our inventory days between -- we would target inventory days between 90 days and 95 days is our target.
Now coming to the second question, what you're talking about is the new concept and the new categories we are launching. See, the fundamental, what we want to be known for is our comfort, quality and pricing. See, one of the reasons why customers have again and again, women customers have again and again come back to Go Colors time and again is because they feel, okay, yes, it's a very high-quality product from a comfort perspective and the pricing is sharp. So as a positioning perspective, Go Colors is known for these 2 things. And those 2 things are the things aspects what we are going to be fundamentally extending to these new categories as well.
So this is the basis on which we are trying to -- we have made our product. Now hopefully, the pilot should do well and then we'll probably learn a lot more things. But the 2 fundamentals on the basis of which we should be standing aside from other people in the industry is probably our comfort and our pricing. And on the competition part, so we've seen not much competition come up recently from a bottom wear perspective. So I think a lot of competition, like you mentioned, have also consolidated. So from a bottom wear competition perspective, we don't really see any standout bottom wear only brands. But yes, as bottom wear as a category has expanded, we have seen other players in top wear also add bottom wear to their existing portfolio of top wear products.
But bottom wear only brand, we have not seen much competition in the last recent times.
The next question is from the line of Varun Singh from AlfAccurate Advisors.
Sir, my first question is in the bottom wear segment, you called out that the category is maturing, then it is better for us to maybe have a larger addressable market, maybe that is the reasoning which quite explained this foray into the menswear segment. So just wanted to understand that you think that maybe at 1,100 or 1,200 number of stores level, the category appears to be matured, meaning that maybe 8% to 10% kind of a growth possibility. If you can throw some light on that?
No, no. See, I didn't say -- no, I can't correct it. See, I don't say that the bottom wear category is matured. What I meant was, see, right now, the bottom wear category has a lot of potential. And maybe in the coming years, eventually it will mature. So my perspective was saying was that before it matures and tapers off, probably it's a good time to do some experiment. So right now from a bottom wear perspective, we stay very committed to the business because that is the bread and butter of our business and we see strong potential of growth in the coming years. So I don't think the bottom wear business has reached any maturity stage. It is just what I was trying to give an example was that before the bottom wear business reaches maturity in the coming years, it's better to do little few experiments during when your main business is growing well. That is what I meant to say.
Sure. Understood. And secondly, on the Uniqlo benchmarking that you alluded to, just wanted to get that understanding right, given that Uniqlo is 10,000 square feet box size retail and you highlighted about 1,500 square feet allocating about 30% of space for the menswear segment and maybe the pilot of 15, 20 store incremental scale up, et cetera. So like how are you -- will the template be similar what you are doing in the bottom wear with regards to channel strategy that we will be selling our product through MBO, LFS, et cetera, because Uniqlo is not doing so. And in that context, I mean, what do you think would be the true blue blood differentiating factor with us because I think Uniqlo, S&M and other people, they compete very strongly on design and all those thing, but we are saying that we want to stick to maybe essentials and not too much of fashion, fashion because I don't know how you want to strategize the full price sale is that similar to bottom wear or not? If you can throw some light, yes.
Yes, see from a size perspective, look, we are not looking to do 10,000 and all, that's very large. I think we should be able to achieve what we want out of 2,000, 3,000 square feet. I think 3,000 also will be a fit, I think our idea first is only to do between 1,500 and 2,000 square feet. See, at Go Colors, we've always created a template where we take small spaces and show productivity. And we are also approaching this new concept on the basis of the same template, saying that, look, take small sizes and get higher sales per square feet and with higher replenishment cycles.
So I think we should be able to achieve what we want in this range of 1,500 or 2,000 or 2,200 square feet. So from a sizing perspective, I think this is our first step, as we do this, we'll keep learning, we will make some mistakes also, we'll keep learning and correcting those. But at a gross level, if I see, I see ourselves in this range of between 1,500 and 2,000 square feet as far as the new concept is concerned. See, menswear, again, look, it's a very small space, which I'm allotting for menswear. 85% or maybe more inventory is going to be womenswear, which is my forte. Yes, we bought in a very different flavor by adding that 14%, 15% of menswear as a pilot. We'll have to see how it goes. But since we are a strong women's brand, we have kept that product focus also on more womenswear by having it at 85%.
Name of the store would be Go Color only, even in these stores which...
The branding, everything will be Go Colors.
And similar to bottom wear, we will be selling menswear through MBO and large format stores, is my understanding is correct?
No, no, right now, this new concept, whatever I thought, it is going to be very, very limited to our own -- those 15 stores, what I was talking about and maybe the website eventually.
And similarly, like 95% would be the full price sale or we are expecting it to be so similar to the bottom wear?
That we don't know yet. We know it's a high full price sales category ratio, but that is something we will know only after the pilot.
Because we will be dealing with essentials in terms of product assortment.
Hear I speculate and I'm more -- I'm confident that it's going to be a high full price sales ratio category, but I don't know the number yet. I will know only after the pilot. The idea there is to go mainly to those 15 stores and maybe the website in the -- maybe after a few months.
The next question is from the line of Akhil Parekh from BK Securities.
And congratulations Gautam to you and your team for a resilient performance in tough pace too. My first question is on the marketing activities, right, given that you are spreading now into men's functional wear as well. I understand it's only limited to pilot stores, but I believe that there is a certain kind of consumer association of Go Colors brand with women brand. So what kind of marketing activities are you planning to increase the awareness about menswear and will our marketing spends meaningfully go up for let's say next 6 to 12 months as a percentage, that's my first question.
Yes. So Akhil, see, I think, look, from a marketing A&P spends perspective, I don't see the percentage increasing. I think we will be at 2%. And I think through the 2%, we'll be able to do justice for our bottom wear and for the pilot as well. So I don't see our A&P increasing in any way. And as far as Go Colors being a women's brand and whether men's will buy or not, I visualize that it should not be a problem. But I think through the pilot, we'll get a better understanding. But for me, I'm having my fingers crossed that it should not be an issue. But whatever little bit market research I've done, I've studied other international brands also who were women only and then turned men and women, looking at those case studies as well and turn very deep, understanding sales studies, they have a [Technical Difficulty] men's should be able to buy [Technical Difficulty]
[Technical Difficulty] so what's your thought like usually we are seeing brand dilution, the brand.
So, no no, this is a good question, Akhil, and this is something which we debated internally also. See, I'll tell you what, our idea is not to make MBO a very large channel, honestly. EBO is going to be the bread and butter of the business, which is growing to go the fastest followed by LFS. See, MBO, again, is a channel strategy like how we had adopted the LFS. It's a marketing channel for us, not a marketing, but more of a customer acquisition channel for us. So we will give our product only to those MBOs or key accounts where brand dilution will not happen. So it is going to be done in a very selective and qualitative manner. See, my idea here for gaining market share is not just to go and supply to every MBO in the industry, I don't want to do that. I want to give it only to the ones that matter. So the brand also does not get diluted and we acquire customers as well.
But from a channel split perspective, EBO is today 72% to 75% of the business. It is just going to go stronger from here. It is not that we are moving our channel strategy towards MBO. That's not the case.
The next question is from the line of Rajiv Bharati from Nuvama.
So, this is regarding your comparison with Uniqlo. Now our legacy format itself has an inventory turn on, let's say, on COGS of close to 1.3, 1.4 versus, let's say, Uniqlo doing 3x. And now incremental expansion on, let's say, other categories, do you intend to carry lower inventory and address this part somehow, so that inventory turn number basically on COGS rises, particularly because the obsolescence risk increases incrementally?
See, what you're saying is right, Rajiv. The inventory turns in this newer category should be higher. So, we've also been very careful with how much inventory we are buying for these newer categories. So the idea would be to have more turns than what the bottom wear business is doing because the bottom wear business, the supply chain is a very different type of supply chain. So the inventory turn in this should be much higher. But again, it is all depending on how the response is. But our planning is on the basis of doing much more turns than the bottom wear business.
And secondly, on the core business, the geographical split, I mean the general sense is that probably North and East is doing slightly better. But your expansion at least for the last year or so, both I think in LFS and if I'm not wrong in EBO also has been less on the North and still slightly skewed on the South. Are you trying to adjust that?
No, no, no, it's not like that. It's just basis on what is good real estate available. See, I mean, look, we have been expanding everywhere. We -- whatever is relevant, what fits our requirement, so maybe it just so happened that we got more stores in the North. I don't think we are trying to concentrate more on North and East. We are having a equal importance given as far as Southwest, Northeast is concerned. Yes, the one thing what we are definitely trying to do, irrespective of the zone, we are trying to also add more stores in more newer cities, so that basically, we are growing horizontally and not vertically. I mean, look, we have always been a cluster-based expansion model. But to grow -- to drive some balance, we are also trying to add more stores in newer cities, so that we are able to acquire newer customers also in new towns and like irrespective whether it is Southwest, Northeast.
Yes, is it possible to call out what is the let's say South SSG on the EBO side versus the 2% for the entire portfolio?
I think the South SSG also has been positive. It's I think around 1%. I'll come back to you on that number, Rajiv, I don't have it handy, but I think it's around 1%. But one thing I know, the North SSG is high. North SSG is around 5% to 6% and West SSG also is slightly higher. So I'll come back to you with that data.
The next question is from the line of Prerna Jhunjhunwala from Elara Capital.
Sir, just wanted to understand this new -- there have been lot of questions around. But what I'm just trying to understand is the core product that you are talking about. Because if we look at Uniqlo, which is your benchmark, there they can go ahead with -- because it's totally western wear category, it can go ahead with similar products, no problem. But when we come to Indian categories, fashion is actually a big component in a top wear category. So how are you going to look at the mix in Western versus Indian wear? And how do you define core over there? I'm just trying to understand that.
See, yes, I know see and it will be a little hard for me to explain it Prerna because the product obviously is not in the shelf. I think once probably the store opens and you get to see it, you'll understand this a little better, but I'll try explaining it. I think it's going to be a good mix. It's going to be largely Western with a little bit of fusion touch as well. So I think it's going to be more of Western, little of Indian, little of Western and civil. And the kind of way we are going to be playing with the colors and print, it's not necessary that those print will not run for more than 2 years or more than 1 year. It should proceed to the next season as well. So that's how we develop the product. But look, I'll be in a better place to explain the product once it actually hits the shelf.
Yes, I understand. I was just worried on the fashion content because in the top wear, especially Indian wear, the fashion wear component is much higher.
See, one thing, Prerna, we are very clear, we are going to stay away from occasion wear. Our product line is not going to be occasion wear. It's going to be under basics everyday wear say because we don't want to be occasion wear brand. That is not who we are.
Okay. And in menswear also, it will be largely T-shirt, track pant category or it will get into formals as well?
No, no, not formals, more T-shirts, and lounge wear type of category, Polos, CK polos, round neck T-shirts, like those categories.
Sir, my second question is on the inventory. Do you see any risk to inventory in this format coming in, whether you'll be able to maintain inventories at current levels? Or we should see a sharp -- we should see some increase, not sharp, some increase in inventory levels with new categories coming in?
Yes. See, I'll tell you what, I'm not taking a very big inventory this year. See, today, because of my volume of business, what I have in my main business, I've been also been able to optimize on what I'm buying for this new category. So even if this new category is slow to begin with, which fingers crossed, obviously, we should do well. But even in worst-case scenario, if it is slow to begin with, I don't see my company inventory days going very. So that I think will be very much in control because I know inventory is a killer in this business and retail business. So we are very careful with how much we are buying and even in a scenario where sales are slow for this pilot and the pilot may be a little slow to begin with, our inventory days will not spike so much, that fits our operating cash flow.
Actually, I'm not worried on pilot at all, I mean it's about the long-term goal on the inventory that could change with new category.
Long term perspective, on the mid-term and long term, Prerna, very difficult for me to comment because we have not started yet. So maybe if a year goes by, then I will understand what kind of turns I'm doing in the newer pilot, I'll be able to give a guidance on that. As far as the core bottom wear business is concerned, I think 90 to 95 days is a business model which we have tracked very well, which will also further optimize in the years to come.
Understood. And sir in terms of profitability, any guidance on how the profitability can be seen for the next 1 year?
See, we will look to maintain margins without being specific on EBITDA percentages or PAT percentages, we will look to maintain margins at a P&L level. From a gross margin perspective, I see our gross margin maybe in the range of 62% to 63% or maybe little higher. But I think maintaining gross margins and maintaining P&L margins will be our endeavor in FY '26.
Understood. And CapEx guidance in case you're opening more larger stores given this pilot coming in, whether this year we'll see larger stores coming in. So what will be the CapEx spend for the year?
See, I think, I can tell you on a per square feet basis because I don't know how many stores I'm going to be opening on this pilot because see the cash here is my first pilot is also of my existing store network. So the CapEx is not going to be very high. But if I take on a per square feet basis, it will be about INR 2,000 to INR 2,500 per square foot.
And any increase in warehousing or refurbishment requirements that could add up to this?
See, that's we have been, see, that's, Prerna, we have been doing in our existing warehouse for some time now. See, we had a 1 lakh square feet warehouse in Tiruppur. There was some space behind which we extended. So that we have and extended regardless of this pilot or not. So our current location is well equipped to handle any future growth.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference to the management for closing comments. Over to you, sir.
I'd like to thank everyone for being part of this call. I hope we've answered your questions. If you need any more information, please feel free to contact Mr. Deven Dhruva from SGA, our Investor Relations Advisers. Thank you.
On behalf of Go Fashion (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.