Go Fashion has corrected by 30 per cent from its November peak levels, possibly triggered by weak demand environment, impact of which was to some extent seen in its Q3 performance (decline in same store volumes), although relatively less severe when compared to other fashion Retailers like V-mart, Pantaloons, Page, TCNS.
From medium to long term perspective, key investor concerns in this name have been largely around weak entry barriers & sustaining relevance with evolving consumer needs. Given the very limited fashion element in this segment, replicating the product by competition is not a challenge.
However, in our view, within women’s bottom-wear retailing, three critical aspects are sourcing & managing wide range of SKUs, innovation and store economics. Getting these elements right is a challenge and involves a long gestation period.
Go Fashion, through its exclusive focus on this category, has aced these aspects, which is also visible from its large portfolio scale (vs competition), improving share of value added products and superior store economics. While near term demand environment is challenging, long term fundamentals of the business model remain intact.
Recent correction makes valuations palatable (19x FY25 pre-IND AS EBITDA) and provides a good entry point. We re-affirm our positive stance on the stock.