Footwear stocks up on GST cut buzz; time to buy Relaxo, Campus Activewear?

Footwear stocks surged today as reports suggest GST on shoes under ₹2,500 may be cut to 5 per cent from 12 per cent at the upcoming GST Council meet. Relaxo, Liberty, Campus Activewear shares gain

Footwear stocks, GST cut on footwear: Footwear stocks caught investor attention on Friday, August 29, with individual shares surging up to 8 per cent. 

The rally in footwear shares came amid reports that the government may cut goods and services tax (GST) on low-priced footwear during its upcoming GST Council meeting on September 3 and 4.

 

Relaxo Footwear, Liberty shares rise today

According to a report by CNBC TV18, the government may propose to the GST Council to cut GST rate on footwear priced up to ₹2,500 to 5 per cent from the current 12 per cent rate, boosting demand at the lower end of the income pyramid. 

 

  On the contrary, it may propose to hike GST on footwear priced above ₹2,500 to 18 per cent from the current 12 per cent. 

  Reacting to the development, Relaxo Footwears share price zoomed 8.6 per cent to ₹489.10 per share on the BSE in Friday’s  intraday trade. 

  Relaxo is the largest footwear manufacturer in India, targeting affordable footwear segment. It manufactures slippers, sandals, and sports and casual shoes under brands like ‘Relaxo’, ‘Sparx’, ‘Flite’ and ‘Bahamas’. 

  In the April-June quarter of the current financial year (Q1FY26), Relaxo Footwears reported a subdued performance with revenue declining 12.5 per cent year-on-year (Y-o-Y) and 5.8 per cent quarter-on-quarter (Q-o-Q) to ₹650 crore, impacted by continued weak demand in the mass and mid-market segments. 

  Further, while gross profit declined 13 per cent Y-o-Y, net profit rose 10 per cent Y-o-Y to ₹48.9 crore on higher other income. 

  Analysts believe competitive intensity had increased in general trade, with smaller regional players gaining market share after the GST rate was hiked from 5 per cent to 12 per cent in 2022.

  Notably, Relaxo’s sales volumes fell by 14 per cent Y-o-Y and 4 per cent Q-o-Q in Q1FY26 as the company sold 43 million pairs in the quarter (versus 50 million pairs in Q1FY25), due to continuation of muted demand, especially in the mass and mid-market segments, and intensified regional competition in general trade from smaller players.

  However, as the company restrained from using deep discounting tactic to boost the short-term demand, the average selling price (ASP) remained flattish Y-o-Y to ₹151 per pair.

  Analysts at SMIFS Ltd had cut their FY26 and FY27 revenue estimates by 3 per cent and 1 per cent, respectively, factoring slower uptick in volumes amidst muted demand environment. They, however, expect margins to improve on back of operational efficiencies, effective cost management, and streamlined backend processes. 

  The brokerage maintained ‘Accumulate’ rating on the stock after Q1FY26 results with target price of ₹516, valuing it at 55x FY27E EPS.

  Those at Motilal Oswal, too, had ‘Sell’ rating on Relaxo Footwears shares amid persistent volume pressure in Q1 amid restructuring of distribution, muted demand, and heightened competition.

  “While the company is focused on improving its product mix (higher share of closed footwear) to boost growth in the near term, the volume revival in open footwear is equally crucial for growth and profitability. We cut our FY26-28 revenue estimates by 5 per cent each, though Ebitda margin assumptions are raised by 60-80bp, driven by cost controls, resulting in broadly unchanged Ebitda estimates over FY26-28,” it had said in a post result update report.

  That said, Motilal Oswal analysts said current valuations remain rich for modest growth, but signs of demand could turn them more constructive towards the stock. They maintained their ‘Sell’ rating with a revised share price target of ₹410, based on 40x Sep’27E P/E. 

  That apart, Campus Activewear share price and Liberty Shoes share price, too, advanced 2.1 per cent and 1.2 per cent, respectively.  By comparison, the BSE Sensex index was up 0.2 per cent at 11:13 AM.

  Among them, Campus Activewear’s reported revenue for Q1FY26 stood at ₹343 crore, flattish Y-o-Y, with volumes reporting a degrowth of 12 per cent Y-o-Y to 5.1 million pairs (2-year CAGR came in at -5 per cent).

  “At current levels, Campus Activewear stock trades at P/E(x) of 54x and 45x on our FY26E/FY27E EPS of ₹4.7 and ₹5.7 – revised downwards by 8 per cent and 6 per cent, respectively. We continue to value the company at P/E(x) of 55x on FY27E EPS, arriving at target price of ₹314. Hence, we maintain our ‘BUY’ rating on the stock,” said analysts at YES Securities.