The third quarter of the fiscal year 2026 has seen Relaxo Footwears, the largest footwear manufacturing industry in India, report a massive fall in its profitability. The Profit after Tax (PAT) of the company decreased by 19.6% on an annual basis, resulting in ₹26.54crore in the current fiscal, compared to₹ 33.01crore in the same year last fiscal. This reduction in profits is despite the fact that the firm has fairly stable top-line performance, indicating a heavy burden on the bottom line from external and internal cost pressures throughout the October-December quarter.
Revenue from operations and a critical factor
In the third quarter, Relaxo recorded a relatively stable growth in revenue of operations, which increased slightly by 0.2% to ₹668.03 crore against ₹666.90 crore in the same quarter last year. This performance comes after some quarters of consecutive loss of revenue, which the firm has been able to stem with unremitting sales transformation efforts. The total income, including other sources of income, was ₹678.99 crore, and this represented a low growth by 0.79% against the ₹673.70 crore realized in Q3 FY25.
Operating margins placed significant pressure on the company in the quarter under review. The Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) decreased by 16.8% on a yearly basis to ₹69.39 crore against ₹83.39 crore. As a result, the contraction of the EBITDA margin was substantial by 211 basis points to 10.4% as compared to 12.5%. This tightening of the margin was largely explained by higher costs on sales promotion programs that were put in place to combat the stiff competition and to maintain the distributor network.
One of the key causes of the loss of profit was an extraordinary expenditure. The incremental cost of employee benefits in the December quarter was also ₹5.72 crore, that were incurred by the company due to the application of new labor codes. This one-time hit with a 2.22% increase in the total expenses to ₹643.07 crore also stretched the financial performance of the company. This led to a decrease of 98 basis points in the PAT margin of the quarter to 4.0% compared to that of the third quarter of the previous year, which was rated at 4.95%.
Segment performance and financial position
According to the Managing Director, Ramesh Kumar Dua, the overall operating environment was restrained because of the exercise of restrained consumer spending; however, there were pockets in which the environment was resilient. The organized retail (EBO stores), the e-commerce stores, and the large format retail stores of the company reported good performances. The general trade channel has started to record positive momentum. To propel its future growth, Relaxo is endeavoring to centralize its backend operations, streamline its supply chain, and increase operational efficiencies by investing in schemes such as the Relaxo Parivaar platform to enhance retailer interaction.
In the cumulative nine-month year ending December 31, 2025, Relaxo Footwears recorded a 6.8% reduction in revenues obtained on operations to ₹1,951 crore. EBITDA in the same period was ₹250 crore and a 12.8% margin. The nine-month PAT showed a slight decrease of 2.2% per annum, and it stood at ₹112 crore. Even amidst these headwinds, the financial strength of the company is strong, having a strong equity base and is rated [ICRA] AA with a stable outlook, indicating the low risk of credit and financial stability.
Conclusion
The Q3 performance of Relaxo Footwears indicates a transition phase during which the company is between recovery of volume and margin protection. Even though the decrease in net profit to 20% is an immediate effect of the high promotional expenditures and regulatory expenses, the fact that the revenue is starting to stabilize indicates that the sales transformation strategy of the company is starting to show.
Moving forward, the company will adopt a balanced strategy towards top-line growth and margins, with the goal of premiumization and operational excellence to overcome the competitive and inflationary environment of the Indian footwear market.
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