Raymond Lifestyle plunges 8%, at new low on weak Q2 operational performance

Q2 earnings impact: Total income was down 6.2% to Rs 1,735 crore, due to subdued demand and logistics delays in Garmenting business.

Shares of Raymond Lifestyle (RLL) hit a new low of Rs 2,021, falling 8 per cent on the BSE in Wednesday’s intra-day trade in an otherwise strong market after the company reported a weak operational performance for the second quarter ended September (Q2FY25), with earnings before interest, tax, depreciation, and amortization (EBITDA) down 21 per cent at Rs 242 crore. Margin contracted 270bp year-on-year (YoY) to 13.9 per cent from 16.6 per cent in Q2FY24.

 

The company’s profit before tax declined 44.8 per cent YoY at Rs 112 crore. Total income decreased 6.2 per cent to Rs 1,735 crore from Rs 1,849 crore, due to subdued demand and logistics delays in Garmenting business.

 

RLL had weak performance during the quarter amidst subdued demand, weaker consumer sentiment and higher inflationary pressures. Lower offtake due to ‘Shraadh’ in September and muted consumer demand, the company said.

 

At 11:24 am; the stock of the apparel firm was quoting 7.5 per cent lower at Rs 2,036, as compared to 0.59 per cent rise in the BSE Sensex. With today’s decline, it has corrected 35 per cent from its 52-week high of Rs 3,100 hit on its listing day i.e. September 5, 2024.

 

Pure-play Lifestyle company from the House of Raymond: RLL, formed as a demerger from Raymond, has a strong presence in men’s wear (with 65 per cent share in worsted suiting). RLL’s portfolio includes branded textiles (B2B and B2C) and several apparel brands (such as Park Avenue, ColorPlus, Ethnix by Raymond) that cater to formal, casual and ethnic wear. With a strong brand affinity and wide distribution network, RLL has 5 per cent share in men’s wedding wear industry.

 

Raymond spun off its lifestyle division earlier this year to simplify its group structure, attract more investors and help the carved-out entity access more capital.

 

Meanwhile, Motilal Oswal Financial Services anticipates RLL’s growth will be driven by fast paced growth in branded apparels through retail expansion (target to double EBOs); capitalizing on opportunities from Bangladesh +1 and China +1 trends in B2B garmenting; launch of new categories such as innerwear and sleepwear; increasing focus on casualization and premiumization of portfolio, and achieving sourcing efficiencies through scale, which could enhance operating leverage.

 

RLL enjoys a strong brand affinity in men’s wear, but trades at relatively lower valuation due to sluggish execution in the past, with significant PAT volatility over FY10-20. Historically, concerns were related to weak growth and profitability, a high working capital cycle, and leveraged balance sheet. However, in recent years, RLL has optimized its working capital and achieved net cash position, ahead of the guidance. RLL is now focused on fast paced growth in branded apparels through network expansion, foray in new categories such as sleepwear, innerwear and ramp-up of Ethnix by Raymond, the brokerage firm had said.