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Arvind Fashions aims to become zero-debt co in two years; piloting new format


Arvind Fashions, which sells products of brands such as Arrow, Tommy Hilfiger and Calvin Klein, aims to become a zero-debt company in the next two years on the back of higher cash flow and focus on franchise-based expansion, said vice chairman Kulin Lalbhai.

The Bengaluru-headquartered company has rationalised its brand portfolio, reducing it to five fashion brands from more than 20. It has about Rs 300 crore debt. The management last month told analysts that the company’s net debt at the end of the September quarter was Rs 476 crore.

“We embarked on a full-blown strategy 2-3 years back to create large iconic brands where we will get operational efficiencies and profitability by scaling them up,” said Lalbhai. “After the portfolio restructuring, the business is generating high return on capital employed, highly profitable and generating strong cash flow. If we achieve our business plan, the company will be debt free in two years.”

Managing director and chief executive officer Shailesh Chaturvedi told ET that the company plans to increase the size of its stores for each of the brands by 25%, as it looks to expand into more products for each, such as footwear, kids wear and innerwear, and pilot a new large retail format which will house all its brands under one roof.

Arvind Fashions sells apparel and accessories of brands Arrow, Tommy Hilfiger, U.S. Polo Assn., Calvin Klein and Flying Machine through multi-brand apparel stores and over 1,000 exclusive brand stores. While U.S. Polo Assn. is the largest brand with annual sales of more than Rs 2,000 crore, Arrow and Tommy Hilfiger account Rs 1,000 crore of business each, and Calvin Klein and Flying Machine bring in Rs 500 crore each.

The company aims to grow sales by 12-15% annually and improve EBITDA by 100 basis points every fiscal year, said Chaturvedi. A basis point is 0.01 percentage point.The company is also piloting a new format over 3,000-4,000 sq ft with one store in Bengaluru where all the five brands are sold under one roof.“That apart, we intend to open 150-200 exclusive brand stores every year with almost 90% of them through the franchisee route to make it an asset light model,” said Chaturvedi. “However, we will control the operations very tightly.”

Last month, Arvind Fashions sold its wholly owned subsidiary Arvind Beauty Brand Retail, which runs the 26-store-strong Sephora India business to Reliance Retail at an enterprise value of Rs 216 crore. The company had then said it intends to utilise the proceeds to invest in growth of its five brands portfolio and repayment of debt.

“Due to efficiencies, EBITDA grows much faster than revenue and net profit too will grow faster,” said Lalbhai. “We are also looking at adjacencies like footwear, kids-wear and inner-wear as a big segment. Adjacencies currently account for 12-15% of overall business but it can become 25% soon.”

Last fiscal, the company’s revenue went up 45% year-on-year to Rs 4,421 crore, while net profit stood at Rs 88 crore. It had posted a net loss of Rs 104 crore in FY22.


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