Go Fashion (India) Ltd. share price target

Go Fashion reported a broadly stable performance for Q2FY26 with an improved channel mix, supported by stronger LFS traction (26.8% vs. 23.5% YoY) and steady EBO momentum.

Go Fashion reported yet another muted quarter with revenue growth of 7%. A strong pickup in LFS (up 18% YoY) was offset by persistent weakness in same-store sales (-4%).

Go Fashion had a muted start to FY26 with SSSG at -2%, impacted by softer footfalls, LFS channel stress, and shipment delays from Bangladesh.

Go Fashion (India) Ltd (GOCOLORS) reported a muted start to FY26, with revenue growing modestly at 1% YoY, impacted by a 2% SSSG decline driven by weak footfalls, supply chain disruptions due to Bangladesh
import restrictions, and a 13% YoY revenue drop in the LFS channel amid partner-related challenges.

We upgrade Go Fashion to BUY (from Add) with a TP of INR 1,200 (potential ~40% upside). Gautam exuded confidence about improving macros, store expansion plans for FY26 (after a soft FY25), plans (experiments) for portfolio diversification (women's top wear, men's products), channels (attempting MBO, franchising strategies) and international expansion (opened Dubai store recently).

Go Fashion (GOCOLORS), operating under the brand 'Go Colors', is a pioneer and category leader in the women’s bottom wear market, holding an 8% share of the organized market.

Go Fashion’s Q4 revenue was in line with ARe at 12.7% while EBITDA margin came in ~50bps higher at 30.5%. In FY25, it added 62 net (104 gross) EBOs.

GO’s Q4 EBITDA was 7-10% better than estimates, largely led by higher growth in the LFS channel and better gross-margin on higher credit note. Revenue grew ~13%, led by 24% growth in LFS while EBO grew 11% (SSG: 2.1%). EBO SSG was driven by gain in realizations (flat volume).

Go Fashion’s standalone Q3 6.2/3.3/3.9% y/y growth in sales/EBITDA/ PAT was anaemic but decent in the context of the weak demand situation. SSSG/SCSG was flat/4.8%. The gross margin rose 264bps y/y to 64.1%, led largely by low-cost inventory (but also by the favourable product mix and higher EBO sales).

Despite the challenging retail environment Go Fashion’s Q2 revenue grew 10.4% y/y, in line with ARe, led by 0.5% SSSG.

We hosted GOCOLORS (GO) for an Asia roadshow. GO remains confident of delivering medium-term revenue CAGR of >20%, with SSG recovery also helping EBITDA margin get back to the 20-21% range.

Go Fashion’s Q1 revenue came in line with our estimates but the EBITDA margin was ~80bps lower than ARe at 32.8%, on the 0.2% y/y SSSG as sluggish demand was further hurt by the elections and searing heat.

Go Fashion continues to report double-digit revenue growth (16% YoY in Q1FY25), primarily driven by retail area expansion (12% YoY EBO stores) while SSSG remains muted.

We visited multiple Go Colors (GO) stores across Mumbai to validate our thesis
around the bottom-wear category and its TAM. Our conviction on category
relevance got strengthened when we saw customers walking in with their tops
to find their perfect color match.

GO’s Q4 print was weak, albeit results were largely in line and outperformance
(vs. peers) continued with 15% topline growth.

Go Fashion reported revenue growth of 15% YoY driven by continued EBOs expansion (+19% YoY), while SSSG declined by 1% YoY (same-store volume declined by 6%) due to subdued consumer demand environment and seasonality shift. However, ~6% increase in average selling price is reflective of continued improvement in revenue mix (premiumisation from value-added products).

In EBO channel (~74% revenue saliency) we liked the strong value (at 38%), volume (at 25%) and SSSG (at 17%: including 6% price hike, 5% volume and 6% from NPDs) led revenue performance. 10% increase in average selling price is reflective of improvement in revenue mix (from value-added products).

We like the high double-digit SSSG (both YoY and vs. pre-covid quarters) in EBO stores (73% saliency) in Q3FY23 while LFS maintained high-growth momentum. This was driven by premiumisation benefits (through category extensions, higher ASP) given that there was no price hike.

2QFY23 revenue print of Rs1.66bn (up 48% QoQ) was good. Higher EOSS sequentially (GM dilutive) and sharp increase in other opex (mainly ad-spends) led to (reported) EBITDA margin print of 29.8%.

We like the increased ad-spends in the quarter (4.9% of sales vs typical 2%) – these are good spends and we expect (good) brands to increase it in the near-term given most have under-invested for last two years; that said, only limited ones have the required headroom given the inflationary pressure.