Footwear retailer Khadim is recalibrating its growth strategy, placing greater emphasis on store productivity, inventory quality, working-capital efficiency and franchise-led expansion after a challenging FY26 marked by muted discretionary demand.
In his message to shareholders in the company’s Annual Report 2026, Khadim India Ltd, Executive Chairman, Siddhartha Roy Burman, said the company’s immediate priority is to replenish its retail network with fresh and faster-moving merchandise while improving receivables and franchisee collections.
The company has also undertaken cost-efficiency measures that have helped establish a leaner operating structure.
The strategic shift comes as the footwear industry, particularly the mass and value segments, continues to contend with uneven consumer demand and footfalls.
Inventory takes centre stage
One of the key priorities during FY26 was improving working-capital efficiency and inventory quality.
Khadim aligned procurement more closely with actual demand, progressively cleared ageing merchandise and substantially reduced inventory levels. While the exercise had a near-term impact on sales, the company believes it has exited FY26 with a cleaner stock position and lower exposure to future discounting.
The strategy signals a move away from pursuing sales growth at the expense of inventory health.
For a value-focused footwear retailer, tighter inventory management can be particularly important as slow-moving merchandise can eventually require deeper discounts, putting pressure on margins and working capital.
The next phase, therefore, will be about rebuilding sales momentum with fresher merchandise rather than simply increasing inventory.
Demerger creates a sharper retail focus
The completion of the demerger of Khadim’s distribution business and manufacturing segment into KSR Footwear Limited was another major development during FY26.
According to Burman, the restructuring has created a clearer operating structure for the two businesses, allowing each to pursue its respective priorities with greater strategic focus, operating efficiency and more appropriate capital allocation.
For Khadim, the move effectively leaves a more focused retail business.
The company can now concentrate more closely on consumer relevance, store productivity, portfolio development, omni-channel reach and capital-efficient expansion.
This could also allow management to assess retail investments more directly on their ability to generate sustainable returns.
Store count falls, but productivity gains take priority
Khadim ended FY26 with 851 stores across India, comprising 189 company-owned outlets and 662 franchise-operated outlets.
The reduction in store count reflects the rationalisation of locations that failed to meet profitability thresholds.
Rather than treating network size as the primary growth metric, Khadim is increasingly focusing on the productivity and economics of individual stores.
This is particularly relevant in a subdued consumption environment, where maintaining low-productivity outlets can dilute returns and absorb working capital.
At the end of FY26, 78% of Khadim’s retail network was operated through the franchise route, while its entire product requirement was outsourced.
The resulting asset-light structure gives the company greater flexibility while limiting the capital required for physical expansion.
Franchise model emerges as growth engine
Khadim plans to increasingly rely on capital-efficient franchise formats for expansion, particularly in East India and selected markets in South India.
The company’s True Franchise Model (TFM) portfolio recorded strong growth during FY26, reinforcing management’s confidence in the model.
Company-owned stores, however, will continue to have a role in strategic locations where market potential and store economics justify direct investment.
The approach effectively creates a two-track retail strategy: franchise-led expansion for scale and selective company-owned outlets where direct control can generate superior returns.
Value proposition gets another push
Khadim has historically built its market position around making fashionable and dependable footwear accessible to India’s middle-class consumer.
During FY26, the company recalibrated prices in its mother brand to improve competitiveness in value-sensitive categories.
The reduction in GST to 5% on footwear priced below ₹2,500 was also passed on to consumers, improving affordability across a broader segment.
However, the company acknowledged that the tax benefit did not immediately generate the volume recovery it had anticipated.
That experience underlines a broader challenge for footwear retailers: lower prices can improve affordability, but they cannot by themselves overcome weak consumer sentiment.
Khadim’s strategy now appears to be centred on combining value with improved product availability, merchandise freshness and a more productive retail network.
Demand remains the biggest variable
The footwear industry faced muted discretionary demand through much of FY26, with the pressure particularly visible in mass and value segments.
Uneven customer footfalls affected store productivity and franchisee throughput, although some urban and semi-urban markets showed greater resilience.
Khadim responded by aligning primary sales to franchise partners more closely with secondary demand and rationalising unprofitable stores.
The approach is significant because it prioritises the health of the retail ecosystem over pushing inventory into the channel.
For FY27, a recovery in discretionary consumption could provide an operating tailwind. But the company is entering the year without relying solely on a broad-based demand revival.
FY27 strategy: controlled growth over aggressive expansion
Khadim enters FY27 with what Burman describes as a more clearly defined business model and a deliberate approach to growth.
The company intends to serve the core Khadim consumer while widening its product choice across categories and price points.