Wakefit starts FY27 with profitability despite cost pressures

Wakefit, the home and sleep solutions brand, started the fiscal year 27 with increased sales and better profitability, despite facing challenges from fluctuating raw material costs. The company's revenue from operations in the June quarter grew by 16.6% compared to the previous year, reaching Rs 404.9 crore. Profits after tax also improved, rising 19.2% to Rs 23.4 crore, although a Rs 7.3 crore deferred tax charge was subtracted due to the partial release of deferred tax assets from the prior quarter.

Operating profitability, measured by EBITDA, increased by 25.2% to Rs 56.4 crore, with the margin expanding to 13.9% from 13%. Operating EBITDA, which excludes some adjustments and costs, grew by 49.7% to Rs 36.8 crore. Gross profit reached Rs 231.1 crore, with the margin rising to 57.1% from 55.8%, driven by price hikes after supply issues pushed up the costs of Polyol and TDI, two crucial chemicals in mattress production.

Mattresses accounted for 65.9% of the company's sales, followed by furniture at 27.8% and furnishings at 6.3%. Own channels generated 72.3% of the revenue and grew by 20.5% year-on-year, while external channels accounted for 7.6% of the revenue. Repeat customers contributed 36.7% of the revenue during the quarter, and the mattress business grew by 27.3% year-on-year, showing the ongoing strength of the company's core category.

Wakefit added 27 company-owned stores during the quarter, bringing the total to 165. The brand's multi-brand outlet network expanded to 2,250 stores in 701 cities. Wakefit aims to add nearly 80 company-owned stores in FY27, with planned capital expenditure of around Rs 100 crore to Rs 120 crore, of which most will be allocated towards retail expansion.

The company said that the pricing adjustments implemented during the quarter were intended to offset the effects of higher input and supply-chain costs, even as it anticipates the full impact of raw material inflation to become apparent in the first half of FY27. Executive Director Chaitanya Ramalingegowda remarked that the quarter was marked by significant volatility in raw material prices due to the Middle East situation.

The company responded with careful pricing strategies to mitigate the impact of higher input costs while continuing to pursue its strategic objectives.