Footwear retailer Khadim India is undertaking an operational reset aimed at stabilising sales and restoring profitability by FY27, following three consecutive years of revenue decline amid a subdued demand environment.
Management said the company has closed 60–65 underperforming stores as part of a broader rationalisation exercise, bringing its retail footprint to a more sustainable level. The immediate focus is on maintaining sales volumes without further degrowth, while leveraging cost controls and improved product mix to lift margins.
“We want FY27 to be a benchmark year,” the management said during the earnings call, outlining targets of maintaining stable volumes, achieving gross margins of 49–50% and delivering EBITDA margins in the range of 14–14.5%. The strategy hinges on higher average selling prices (ASP), tighter inventory management and disciplined cost optimisation.
Navigating Weak Demand
The December quarter was marked by muted demand, particularly in value-driven segments, as discretionary spending remained under pressure. While urban markets showed pockets of resilience during the festive period, overall consumption trends stayed measured.
Against this backdrop, Khadim focused on prudent inventory alignment to mitigate markdown risks, especially during the extended festive cycle. Management acknowledged that gross margins in the first half were impacted by extended end-of-season sales (ESS) lasting nearly six months, price reductions following GST cuts, and discount-led sales that accounted for 20–25% of revenues.
An additional 3–4% margin impact stemmed from price cuts. However, gross margins showed sequential improvement in the third quarter compared with the first two quarters, signalling early signs of stabilisation.
Premiumisation and Portfolio Tweaks
As part of its margin recovery strategy, Khadim has reworked its product profile, sharpening focus on premium and lifestyle segments. Its partnership with Skechers recorded a sequential doubling of sales during the quarter, driven by strong consumer acceptance and improved throughput across pilot locations.
Among in-house brands, British Walkers posted a healthy 9.9% year-on-year growth, supported by traction in men’s formal and semi-formal categories, while Sharon maintained stable performance aided by refreshed designs and enhanced in-store merchandising.
The athleisure portfolio continues to attract steady consumer interest, with expansion being guided by store-level performance metrics. The company is also intensifying localised marketing initiatives and improving visual merchandising standards to drive higher conversions.
Asset-Light Expansion, Regional Focus
Going forward, Khadim plans to adopt a more asset-light expansion strategy, prioritising franchise-led growth. Management indicated that East India is currently delivering stronger growth relative to the South and West, with no immediate plans for store openings in the West. Expansion over the next two to three years will be concentrated in the East and select southern markets.
The company is also increasing its focus on e-commerce and institutional sales to offset lost volumes from store closures and enhance margin contribution.
Path to Recovery
Operationally, Khadim remains focused on cost optimisation, working capital efficiency and stronger franchise engagement to improve store-level profitability. Management believes that once revenue stabilises, EBITDA margins will meaningfully improve, supported by a leaner cost structure and improved product mix. With store rationalisation largely complete, inventory corrected and a clearer regional and portfolio strategy in place, Khadim is positioning FY27 as an inflection point, aiming to transition from stabilisation to sustainable, profitable growth as consumer demand gradually recovers.