Kewal Kiran Clothing Limited (KKCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Kewal Kiran Clothing Limited Q3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] Before we begin, a brief disclaimer. The presentation, which Kewal Kiran Clothing Limited has uploaded on the stock exchange and their website, including the discussion during this call contains or may contain certain forward-looking statements concerning Kewal Kiran Clothing Limited business prospects and profitability, which are subject to several risks and uncertainties and the actual result could materially differ from those in such forward-looking statements. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hemant Jain, Joint MD of Kewal Kiran Clothing. Thank you and over to you, sir.

Good afternoon, everyone, and thank you for taking the time to join us today. Welcome to Kewal Kiran Clothing Limited Q3 and 9 Month FY '26 earnings call. I'm joining by Mr. Pankaj Jain, President, Retail; and Marathon Capital, our Investor Relations advisers. We are pleased to report yet another strong quarter of consistent double-digit growth both on a stand-alone and consolidated basis. Our consolidated sales grew by a robust 18% year-on-year, which is clear validation of our focused execution and the resilience of consumer demand. For the 9-month period, our performance stands strong at 24.4% giving us good momentum towards exceeding our guide range. Let me walk you through some of key highlights for the quarter. Consolidated revenue for Q3 FY '26 stood at INR 301 crores, up 18% year-on-year led by strong growth in both volumes and value. Stand-alone revenue grew by around 13% year-on-year to INR 228 crores with growth contributions from both apparel as well as accessories category. Apparel growth on consolidated basis was 16.6% year-on-year driven by robust consumer demand, especially for our winters and enhanced market presentation. This clearly underscoring the effectiveness of our design and product initiatives. Coming to our operational performance. This quarter results are testament to 3 things: effective execution of our growth strategy; second, the strong appeal of our fashion-driven collections; and our ability to navigate the competitive landscape with agility. Together, this reinforce our confidence that our growth levers are firing in the right direction. Some notable operational highlights across our brands include: Killer alone now operates 456 EBOs and continue to expand its footprint in MBO as well as other channels. Lawman where we are seeing a smooth D2C pivot with an expanding network of brand-focused EBOs to 93. Discontinued network is in the MBOs. Integriti, which has been repositioned with the new pricing and value propositions to address the large market. Junior Killer gaining positive traction in kidswear category. Kraus, robust sales performance and growth in EBITDA margin at par with overall KKCL. KKCL margin profile on track to evolve a significant player in the women's casual wear market started getting good traction in MBOs, export market and expanded EBOs network to 23. Focus now towards further improvement in working capital cycle. In parallel, we continue to work on new initiatives, including experimenting with ethnic wear and exploring new categories such as footwear and lifestyle accessories. With these strategic initiatives gaining traction, we remain confident in our path of achieving INR 1,500 crores in sales by FY '28. On the profitability front, EBITDA came in at INR 63 crores reflecting a staggering 34.2% growth year-on-year. EBITDA margin expanded to 20.9% driven by efficient operational performance, surpassing our guided range of 17% to 18%. Key driver of this margin expansion include operating leverage, a favorable product mix and continued cost discipline across the business. Notably, there has been an impressive EBITDA margin improvement for Kraus, which stood at 23.7% for the quarter demonstrating our ability to drive cost synergy post the acquisition effectively. On the distribution front, pleased to share that all our channel of distribution reported healthy double-digit growth underscoring the effectiveness of our go-to-market strategy. Revenue grew 15% in the retail channel and 21% in non-retail showcasing balanced and healthy growth across our format. In line with our strategy to expand our brand footprint, we added net 14 exclusive brand outlet EBOs during the quarter taking our total to 666 stores as of December 31, 2025. Killer alone now operates 456 EBOs, underscoring its dominant brand presence well supported by continuing growth in EBOs of Kraus and Lawman. In relation to our brand momentum, the recently concluded Autumn Winter 2026 trade show in January across our key brands received a very encouraging response. By showcasing our collections alongside key competitor under 1 roof, we were able to demonstrate our competitive strength and generate strong engagement. This has further boosted our visibility and reinforced our partners' confidence in our brand. Coming to our outlook and strategy. Looking ahead, leveraging our iconic brand and agile retail infrastructure, we believe KKCL is well positioned to seize emerging growth opportunity. We will continue to drive growth by expanding our EBO network, strengthening partnership with national chain and MBOs and broadening our product offering in line with evolving fashion preference. We remain confident that our focus on stability, sustainability and scalability with clearly defined goals, we continue to drive long-term value creation. With that, I now like to open the floor for questions.

[Operator Instructions] The first question is from the line of Ankit Babel from Subhkam Ventures.

Congratulations for excellent set of numbers. Sir, a couple of questions. You did mention in your initial remarks about some change in your strategy in Lawman and Integriti. Can you please explain that in detail that what strategy you have changed and what was the impact of it on the revenues during the transition phase?

Okay. Lawman generally was priced somewhere between Inergriti and Killer. We have discontinued it from the distribution network and its full-fledged focus to make it a more D2C brand and consumer-focused brand with the expansion of EBOs. Lawman has already touched close to around 93-odd stores and we are seeing a good and positive attraction in that brand now. Over the last 2 years, there was a revenue dip by close to around -- there was a dip in revenue and I feel going forward -- that repositioning of the brand has helped the brand and going forward there will be a double-digit growth in that brand. Going with the Integriti brand, it was -- looking at the value format, we have now introduced it into more modern trade channels. We have revised its price brackets and we have started seeing attraction for it. I feel the growth for the Integriti brand will start happening from first quarter of the next year period.

These 93 EBOs of Lawman were opened in what time frame?

Close to around 14, 15 months period.

Okay. And what is the strategy here? What kind of growth are you seeing in these EBOs in the next 12 months? How fast you are going to increase it?

So first enhancement was to have a unit metrics positive, which we feel should happen from this year itself. We have -- the number of stores growth should start happening from next year now.

No, that I understand. But at what growth rate? I mean this 93, what are your plans to take it to, say, in the next 12 months to 150, 125 or 200-odd?

So the stores -- as we mentioned it, the number of stores shall double in 3-year period.

[Foreign Language]

I understand. So the margins in these brands would also be similar to the company level margins?

Not necessary, Ankit bhai. [Foreign Language] But end of the day, what we are committing is KKCL should have 17% to 18% EBITDA margins [Foreign Language].

Why I asked this question was that if these brands are already doing low margins and after considering those low margins, you have reported some 20% margins. So going forward, the margins in these 2 brands will only improve so at least you sustain your margins at current levels at 19%, 20%.

[Foreign Language] But yes, we always try to be better only and we are working on that.

Okay. And sir, so shall we conclude that the transition phase of Lawman and Integriti is now over and they will only contribute towards the growth rate, which was missing in the last 12 to 18 months?

You can conclude that, but you'll still see that traction from first quarter of next year itself.

The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Congratulations for good set of numbers. Sir, broadly we are a domestic-centric brand right now and we're able to -- let's say, the guidance is towards 15% to 20% sort of growth for next 2, 3 years. That is what broadly we are aligning with. But now the market has opened in terms of India in the U.S. side also, Europe side also and multiple trade deals that India has entered into different countries over last 6 months period. So now there is a renewed interest. So to achieve little more aspiration and we are a very cash-rich balance sheet right now and these global brands are also coming towards our country. So any thought process on that count to tap the global market also and probably go slightly higher in terms of growth opportunities or still we feel that we'll be domestic-centric and we'll only focus on domestic side because you might not have tapped the entire potential of this country itself? So if you could guide on those count will be really helpful.

[Foreign Language] So it's too early to say anything and I don't want to commit anything because [Foreign Language] what is our first target? Our first target is whatever I committed to you, you can see here I want to do INR 1,500 crores. [Foreign Language]

To answer your question, Bafna ji, it's still on our mind, but still not on paper.

Why that is what I'm trying to understand because...

On our minds, but not yet on paper.

[Foreign Language] There has to be something as a strategy which you have to put in place. There has to be a team which will cater to those markets.

I understand what you're trying to say, Bafna ji, but it's not going to happen for the first year itself. If you're looking at the quarter -- the year '26-'27, nothing is going to happen. We'll put -- it's on our mind that a new team has to be established for this thing. Maybe it happens for the second half of the first year of '26-'27, but nothing finalized for that.

Okay. Got it. And about all the brand-centric business right now, I was there on that day and we have observed that most of the distributors who have come, they were pretty much excited for the Killer brand. And we have also noticed that maximum orders that they were putting is about the Killer brand. And not so excitement was there for the other brands that we are having. So just to get as a sense of curiosity, it was just a ground observation not something that probably I can vouch for. But what we have observed I'm just sharing and your thought process on that to create that kind of curiosity and excitement for your other brands. What is something that probably you can elaborate on that? What strategy that probably you will deploy?

It was a pool of investors, all my buyers all put together. Killer being the flagship brand, definitely you will see some that excitement and the other set of investors. But in terms of orders, there has been a growth in terms of all the brands.

[Foreign Language]

[Foreign Language] Like are we going for the store addition count [Foreign Language] because your growth is anyway proportion to the square feet addition. Whatever that you're holding right now [Foreign Language] that will also drive your growth. Of course profitability is the prime important, you've already indicated that. But any thought on that? [Foreign Language] And of course the second part is that the normal SSG growth [Foreign Language]?

[Foreign Language] Now I'm targeting 2,000 or above 1,500. We can keep all my Junior or maybe in future my Killer ladies launch. [Foreign Language]

[Foreign Language] I have observed in Arvind Fashions, I have observed in multiple [Foreign Language] But the attraction in the malls and all is the large format stores right now.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

The next question is from the line of Pratik from CCIL.

So to continue with the previous participants, you indicated that current focus is on driving positive same-store growth before SSG expansion. So could you help us understand what is constraining in the pickup at the store levels? I'm talking about Lawman brand. So specifically our challenges is more related to merchandise relevance, store location quality and catchment section issues?

See, Lawman was already present. I said getting the product, the pricing, having that attraction and having the repeat buyer was -- also getting the unit metrics right was the challenge for year 1 period. We see that. We are seeing that getting into place within this year. So that's the reason we are saying that the growth expansion or the number of stores expansion in Lawman is going to happen for the next year period now. When we said about the market scenarios, we see that there was a healthy growth. The like-to-like stores for all the stores put together on Kewal Kiran front, there was a 10% SSG growth for the 9-month period.

So is my understanding correct that there is no issues in merchandise front right now?

See, there are plus and minuses happening in the market scenario, but I don't think that market is not growing.

Okay. And sir, second thing is the company has recently introduced the Punya brand to participate in ethnic wear segment. But there was a limited discussion around this initiative in the presentation and opening remarks. Could you help us understand regarding the strategic intent behind entering this category?

As we mentioned in our presentation that we are doing lot many pivots is one of our pivots. It's too early to comment on it.

Okay. And sir, I was just asking because at this stage while we are recovering Lawman Pg3, Integriti, scaling up Kraus and expansion of Kids segment.

I'm saying small, small pivots are happening on the back end also. Too early to comment as of today on Punya.

Okay. And finally, sir, with the expansion into categories such as women and kids, winter wear, et cetera, we are looking to relaunch K-Lounge as a format showcasing the entire portfolio a few times back. Could you elaborate on the incremental strategy for this format?

Right now our entire focus is opening brand-oriented stores and that's the reason K-Lounge has been kept on hold.

Okay. All right. And just a final question. Kraus delivered a strong growth of 37.5% during the quarter. Could you help us understand the drivers of this performance? Specifically, how much of the growth came from expansion and distribution reach versus like-to-like growth within the existing network?

[Foreign Language]

Okay. So can you just highlight how much would be like-like growth within the existing network?

It was more than 10% on L2L.

The next question is from the line of Naveen Baid from Nuvama Asset Management.

Congratulations on a great set of numbers. Just wanted a couple of data points. One, what is the retail area that we are currently sitting on as of the end of Q3? And what was the consolidated same-store sales growth for the quarter?

Okay. The L2L growth for 9-month period was around 10% and for the quarter was around 1%. 1% was because of change in season period for the quarter 2 and the quarter 3 differentiation.

Okay. And what's the retail area that you're sitting on?

I don't have that number on hand right now, but we can take this question offline.

I'll connect with you offline.

The next question is from the line of Deepak Ajmera from IGE India.

So my question is regarding the bifurcation of the growth since having said that we want to grow around 15% to 20% a year. So how could the bifurcation look like between, let's say, per square foot growth and triple LC?

We are growing on all the channels of sales or maybe we are operating on all the channels of sales. Giving a number in terms of square foot is not the exact example where -- it's not the exact example. But definitely we are monitoring L2L formats where we have been growing drastically. For the 9-month period, the growth was around 10%.

Okay. So what could the prospective proportion could look like? I'm not pinpointing down you on a particular number, but how could the proportion of the growth look like?

Right now on the consolidated level, the retail to non-retail mix is around 55-45. I think it should stay in the similar levels.

Okay. Got it. And secondly, in recent past we have been growing faster than 15% to 20%, correct? So why now is our endeavor to, let's say, growth in between this range?

Deepak, I feel the base was lower and that's the reason. That said, most -- I would say we feel that that's the most achievable number where we can sustain that growth as well as scale it without any change in margins.

The next question is from the line of Naitik from NV Alpha Fund.

Sir, my first question for the first 9 months almost INR 900 crores and this year [Foreign Language] seems doable. [Foreign Language] Isn't that a bit conservative because that means [Foreign Language] the next 2 years.

See, the entire presentation was given a year before. Definitely this year we'll be surpassing our estimates and that's the reason. If there is any change in the estimates, we will definitely let you know.

[Foreign Language]

Got it, sir. Sir, my second question [Foreign Language]. Is it safe to assume 60% of our revenue will come from retail channels given that we are adding stores aggressively?

Right now the retail mix to non-retail mix is around 55-45. It may change over to 2% or 3%, not major.

Right. And sir, given channel margins are better than non-retail so we should also see some bit of either maintaining the margins or better margins than the 17%, 18%, right, as the mix increases [Foreign Language].

On the composite blend, the margins are similar in terms of retail as well as non-retail.

It's similar. Okay. Got it, sir.

The next question is from the line of Arpan Rathore from Inside Advisory.

First of all, let me congratulate on a great set of numbers, specifically both revenue growth and EBITDA growth exceeding the absolute number. So couple of questions from me. First is see expansion in gross margin. What would be a sustainable gross margin going forward?

So the gross margin is a composite mix of the channel as well as the category as well as discounting in the market or how the market performs at. Last year, it was close to around 40%. But this year it's around 42%. I think that's a maintainable gross margin for us.

Sure. Secondly, will it be possible to share the EBITDA margin for Kraus now vis-a-vis what it was when we had acquired it?

When we acquired, it was around 12% to 13%. Currently it's about 20%.

So my next question is on that only. You have demonstrated successfully in improving the numbers for a brand which you acquired. What would be the next target?

Improving the working capital for that company.

That would be great. No, no. So that is in terms of the cost. But I'm saying now that the company has sufficient cash reserves, will there be another acquisition going forward soon?

[Foreign Language] Then only we acquire that brand. So yes, we are open for that acquisition. [Foreign Language]

Great, sir. What would be the growth guidance for, say, FY '27-'28 broad numbers?

Double-digit growth. [Foreign Language] Nobody. Not a single promoter will give 100% perfection. But yes, we have try always. [Foreign Language]

That's true. And one broad question. There is too many FTAs which have got signed, the trade deals. And we have an established brand already plus we have a great set of manufacturing facilities. Will we be looking at export potential?

Yes, maybe. [Foreign Language] We are ready to take that opportunities also.

[Operator Instructions] The next question is from the line of Sahil Doshi from Thinqwise Wealth Managers.

Congratulations on a great set of numbers. Sir, just this gross margin expansion, which we've seen in this quarter, I just wanted to understand little better. One, we've seen almost 50% kind of a growth on a Y-o-Y basis on others and accessories. Is that also contributing to this or do you think that the entire portfolio realignment you [indiscernible] Integriti, Lawman, all of that is complete and now we are confident that this kind of a gross margin is sustainable?

So it's a mix of everything. I said it's a channel mix, brand mix, also the factors relating to discounting, how the market performs. So everything was put together. And I think now maintaining this level -- this level is maintainable.

Understood. So just trying to understand strategically when if our gross margins are likely to be maintained at this and we are at around 20% margins. So when we are saying 17%, 18% is what we should go towards or we should think so that delta is being eaten away by what line item? Is it aggressive brand spend which we want to do or it will be on the pricing side?

You rightly caught it right. It would be more towards the brand spend.

Okay. Because that we are not seeing it at least in this year, at least in the selling and distribution expenses haven't really increased. So just wanted to strategically understand 2 to 3 years out, how much this 5% spend should it go to 7%, 8%?

It will remain between 5% to 7%.

5% to 7%. Okay. Because like we're saying pricing we are now okay with 42%. So that's why I'm not able to see where -- I think there is enough room for us to do better than the guided range.

But I feel we have already delivered on the gross margin level. Now going to the line item, which is below the line activity, it will be going towards the S&D spend.

[Foreign Language]

Appreciate that, sir. Kraus if I see, we've done a fabulous almost 37% growth in this quarter and margins come to around 24%, which is much higher than even KKCL has done. So how sustainable is this is what I wanted to understand?

Our guidance still stays at around 18% to 20% on a consolidated basis.

Okay. Because you said that your first objective was to get their margins at our level. Of course that seems to have increased better than our level on a blended basis. So do you think there's likely -- again when we are saying 17% to 18%, is it more on the pricing side or more on the investment in the branding and the other?

So you will see that the S&D cost is minimal for Kraus brand. That additional delta will be spent there.

Okay. Understood. And just lastly, to understand this gross growth better, like you said, 37% growth is there. You said LTL is more than 10%. But ideally it should be much higher, right, because your MBO share is not -- or distribution will not have increased so much.

It is increasing. So it is more than 10% and the number of counters have increased also.

Okay. And where do you see this? Like for the next 1 to 2 years, this should be a continued journey for the next 2 to 3 years?

[Foreign Language]

The next question is from the line of Resha Mehta from GreenEdge Wealth.

Congrats for a good set of numbers. Just 2 questions. One is what is our repeat purchase rate from our EBOs? [Foreign Language].

I don't have that number on hand right now. But we can take this question offline. I'll get back to you. My team already has it, but I have not with that number right now.

Sure. Maybe if you can share it offline, that would be great. And the second one is basically we fixed our positioning and merchandise, et cetera, a bunch of things for Integriti, Lawman, right? Izel is in a no man's land. From a consumer perception, there is no real differentiation between, let's say, an Izel or an Integriti brand. So what is the reason to keep the brand alive or will we axe the brand? Just any thoughts there? Because eventually, yes, capital in the form of working capital to block [Foreign Language].

So every brand was launched with a particular brand positioning and scenarios as they were prevailing in the market. It was -- in 2000, it was brought in in competition to some of the brands. Yes, definitely you are right that it looks somewhere leftover within the company itself. We are not fighting all wars together. We are choosing our wars, which we feel that the one which we could achieve faster is what we have contributed now. Definitely there will be -- I feel it does have much scope to improve on. Maybe we'll reposition the brand strategy for it, but that's going to happen from maybe the second year not this year.

[Foreign Language] Do we still want to -- aren't we open to doing away with the brand?

Even on the business perspective, the EBITDA margins or the total margins are positive for all the brands. Reshna, it's positive for all the brands even for Izel.

Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference over to Mr. Hemant Jain for closing comments. Over to you, sir.

Thank you once again for joining us today. We truly value your continued support and confidence in KKCL journey. Should you have any further questions, please feel free to reach out to our Investor Relations team. Thank you and have a great day ahead. Thank you so much.

Thank you. On behalf of Kewal Kiran Clothing Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.