Campus Activewear stock stumbles post March quarter results

The company saw a contraction in demand across rural and semi-urban areas. Sales volumes dropped by 2% year-on-year to 5.5 million pairs during the quarter. However, a slight uptick in the average selling price cushioned the revenue decline to some extent. As a result, Campus' consolidated operating revenue fell 1% to ₹348 crore.

Despite the downturn, the company saw its gross profit rise almost 5%, and the gross margin surged by 298 basis points year-on-year to 51.4% in the quarter. One basis point is one-hundredth of a percentage point. Analysts at Motilal Oswal Financial Services attribute this surge to moderation in raw material costs, price hikes in new product releases, and strong performance in particular legacy segments.

Although the gross margin exceeded the broking firm's estimates, the Ebitda (earnings before interest, tax, depreciation and amortization) margin's performance was less impressive. Campus' Ebitda margin stood at 16.3% for the March quarter, a significant decrease of 600 basis points year-on-year. Analysts at Motilal Oswal had projected this figure to be 21.2%. Consequently, Ebitda for the quarter plummeted nearly 28% to ₹56.5 crore.

What gives? Other expenses shot up by a whopping 50% year-on-year in the March quarter, weighing heavily on Ebitda margin. This could be due to an increase in advertisement and promotion expenses on new product launches. Some of the increase can be attributed to the doubling of stores and warehouse rent, point out Motilal Oswal analysts. As on 31 March, Campus’ exclusive brand outlet count stood at 202 versus 107 at the end of FY22.

Over the past year, Campus' shares have fallen nearly 18%. A substantial rebound in demand is essential to boost volumes and improve investor sentiments. Moreover, an upswing in the margin trajectory would also augur well.