In a recent financial update, Relaxo Footwears Limited disclosed a 21% drop in its net profit for the first quarter ending June 30, reporting a profit of Rs. 44 crore (approxi US$5.1 Million) compared to Rs. 56 crore during the same period last year.
Despite this decline, the company experienced a slight increase in turnover, reaching Rs. 748 crore (approxi US$90 Million) against Rs. 739 crore in the corresponding quarter of the previous year.
The Chairman and Managing Director, Ramesh Kumar Dua, attributed the modest revenue growth to challenging consumer sentiments influenced by various factors, including election-related disruptions and extreme heat affecting different regions of the country.
Dua emphasized that the current market environment has dampened consumer spending, leading to lower-than-expected demand for the company’s products.
“We are operating in a labour-intensive industry where government-set minimum wages have risen significantly.”
Ramesh Kumar Dua, Chairman and Managing Director
He explained that, in light of the subdued market conditions, the company decided against passing on the increased costs to consumers. This decision was made to maintain competitiveness in a market that has not been performing as expected, ultimately impacting profitability this quarter.
Additionally, the company has been making capital investments aimed at expanding its future production capacity. However, these investments have led to higher depreciation costs, further pressuring profit margins.
In conclusion, while Relaxo Footwears Limited has managed to maintain a slight increase in turnover, the company faces several headwinds, including changing consumer behavior and rising operational costs. As the market dynamics evolve, it will be crucial for Relaxo to navigate these challenges effectively to restore profitability in the upcoming quarters.
