ICICI Securities has reiterated a BUY call on Arvind Fashions with a 12-month target price of Rs.595, implying an upside potential of nearly 29% from the current market price of Rs.460. The brokerage believes the company’s aggressive premiumisation strategy, expanding direct-to-consumer ecosystem, and improving operational efficiency are creating a structurally stronger fashion retail business. Strong traction across brands such as US Polo, Tommy Hilfiger, Calvin Klein and Flying Machine has helped the company deliver double-digit growth, while margin expansion and rising return ratios indicate improving execution discipline. ICICI Securities expects earnings momentum to remain robust over FY27 and FY28.

ICICI Securities Sees Structural Re-Rating Opportunity in Arvind Fashions

Arvind Fashions Ltd. has emerged as one of the stronger premium apparel plays in India’s discretionary consumption segment. The brokerage highlighted that the company’s revamped business structure is beginning to deliver sustainable operating leverage, stronger profitability and improved capital efficiency.

The fashion retailer operates a diversified portfolio of international and domestic brands including US Polo Association, Tommy Hilfiger, Calvin Klein, Arrow and Flying Machine. The company currently manages over 1,025 retail stores with more than 13.3 lakh square feet of retail space while simultaneously maintaining a presence across more than 9,000 multi-brand outlets and departmental stores.

ICICI Securities believes the strategic focus on fewer but stronger brands, coupled with accelerated direct-to-consumer expansion, is helping Arvind Fashions evolve into a more profitable and scalable enterprise.

Q4FY26 Performance Reflects Strong Consumer Demand

The March quarter numbers demonstrated broad-based momentum across retail and digital channels. Consolidated revenue during Q4FY26 rose 14.8% year-on-year to Rs.1,364.8 crore, supported by resilient consumer demand and stronger retail execution.

Retail business revenues expanded nearly 15%, supported by like-to-like growth of 7.8%, while the online B2C segment delivered exceptional growth of 46% during the quarter. Wholesale operations also posted healthy growth, indicating balanced channel performance.

The improvement in channel mix, especially the increasing contribution from higher-margin direct channels, positively influenced profitability metrics.

Gross margins improved to 54.1%, while EBITDA margins expanded by 51 basis points to 13.9%. Profit after tax from continuing operations surged 56% year-on-year to Rs.42 crore, highlighting improving operating efficiency.

Premiumisation Strategy Driving Revenue Acceleration

ICICI Securities expects Arvind Fashions to maintain mid-teen growth momentum over the next two financial years.

Management has guided for 12-15% revenue growth during FY27, supported by retail network expansion, high single-digit same-store sales growth and strong digital demand. The company plans to add nearly 1.3-1.4 lakh square feet of retail space annually.

Premium brands remain the core growth engine.

US Polo continues to be the standout performer within the portfolio, benefiting from product innovation, strong brand positioning and rising consumer traction across offline and online channels. Tommy Hilfiger and Calvin Klein are also expected to sustain double-digit growth trajectories as premium fashion demand remains healthy in urban India.

Meanwhile, Flying Machine has staged a meaningful turnaround. The denim brand has been repositioned toward Gen Z consumers with a sharper youth-focused identity, resulting in strong double-digit retail growth and nearly 70% B2C growth during the quarter.

D2C Transformation Improving Margins and Return Ratios

The brokerage views the increasing share of direct-to-consumer business as one of the most important long-term value drivers for the company.

The contribution from D2C operations — including retail and online B2C — has increased from nearly 50% in FY24 to 56% in FY26. Management expects this figure to approach 60% over the next two to three years.

This transition is important because D2C channels offer significantly higher gross margins, stronger inventory control and better customer engagement compared to wholesale channels.

The company’s EBITDA margin improved by 35 basis points during FY26 to 13.4%, while management expects another 30-40 basis points of expansion during FY27 despite inflationary pressures and global sourcing uncertainties.

Several operational initiatives are expected to support profitability:

• Advance inventory procurement for upcoming seasons
• Greater domestic sourcing
• Selective price hikes
• Analytics-led pricing strategies
• Reduced discounting intensity
• Higher full-price product sell-through

ICICI Securities also noted that the company’s return on capital employed improved sharply to 26% in FY26 from 19% in FY24, indicating stronger utilisation of capital and operational discipline.

Adjacency Categories Emerging as New Growth Engines

Footwear, innerwear and adjacent lifestyle categories are rapidly becoming important contributors to the company’s growth profile.

Adjacency categories now contribute nearly 24% of overall business revenues and are growing at roughly 25% annually. Management sees meaningful scaling opportunities in footwear and innerwear, especially under the US Polo and PVH portfolios.

The company currently operates 19 Stride footwear stores and continues to expand its online footwear business aggressively. Analysts believe these categories could materially improve average transaction values and customer retention over time.

Risks Remain Linked to Global Volatility and Consumer Trends

Despite the optimistic outlook, the brokerage highlighted several risks that investors should monitor carefully.

Management acknowledged ongoing challenges related to raw material inflation, rupee depreciation, shipping pressures and geopolitical uncertainty arising from the West Asia conflict. Prolonged escalation could impact consumption demand and sourcing costs.

Additionally, the company remains dependent on licensing agreements for major global brands. Any inability to renew these agreements could materially impact operations. Delays in adapting to evolving consumer trends also remain a structural risk for fashion retailers.

However, ICICI Securities believes Arvind Fashions has already initiated mitigation strategies through inventory hedging, deeper domestic sourcing and tighter cost controls.

Financial Outlook and Valuation

The brokerage expects robust earnings growth over FY27 and FY28.

ICICI Securities expects revenue, EBITDA and PAT to grow at CAGR rates of 14%, 18% and 38%, respectively, over FY26-FY28.

The brokerage has assigned a target price of Rs.595 based on 9x FY28 estimated EV/EBITDA valuation multiples, while reiterating its BUY recommendation on the stock.

For investors, the key monitorables will remain sustained same-store sales growth, margin expansion through D2C scaling, and the company’s ability to maintain premium brand momentum amid an uncertain macro environment.