Brokerage firm Anand Rathi has upgraded Go Fashion (India) to 'Buy' with a price target of Rs 305, betting on the retailer's strategic pivot toward larger store formats. This upgrade follows a soft second quarter where profits fell due to festive season timing and rising costs, though the company anticipates an operational recovery in the second half of the fiscal year.
Anand Rathi has revised its stance on Go Fashion (India) Limited, upgrading the stock to a 'Buy' rating with a price target of Rs 305. This upgrade arrives as the company undergoes a significant restructuring of its retail footprint, aiming to improve long-term store productivity despite recent short-term challenges.
The company’s performance in the second quarter of fiscal year 2027 was affected by a combination of factors. Revenue from operations declined by approximately 2.9% to 3% compared to the same period last year. Net profit also fell to ₹9 crore in the quarter ending September 30, 2026, compared to ₹21.8 crore in the corresponding quarter of the previous year. Management has attributed this dip largely to the timing of the festive season, which shifted dispatch volumes into the third quarter.
At the core of the company's current strategy is a transition from small to large-format stores. The business is closing smaller outlets—typically those under 300 square feet—to focus on larger spaces exceeding 700 square feet. This process has led to a net reduction in the number of stores, with 23 smaller outlets closed in the second quarter alone. However, the total retail area has continued to grow, reaching approximately 4.48 lakh square feet by the end of September 2026, up from 4.34 lakh square feet in March 2026. This indicates that the company is replacing smaller, less efficient units with larger, more productive ones.
Profitability has also faced pressure, primarily from an 8-10% increase in fabric costs during the quarter. To combat these rising expenses, the company is looking to implement calibrated price increases. Whether these price adjustments are successfully absorbed by consumers without hurting demand will be an important factor for investors to monitor in the coming quarters.
The brokerage anticipates a stronger performance in the second half of the fiscal year. This outlook is supported by the expected pick-up in festive demand and the stabilization of the store closure process. Investors may continue to track the performance of these new, larger stores, specifically looking for sustained improvements in same-store sales growth, as well as the company’s ability to protect its profit margins amidst raw material price fluctuations.