FirstCry reported a mixed 2QFY26, with IMC GMV growing 12% YoY due to delayed consumption owing to GST reforms and slower offline business, whereas International GMV grew 8.9% YoY. GlobalBees revenue got dragged due to non-core brands leading to 14% YoY despite core brands growing 30% YoY. While consolidated gross margin declined 60bps YoY to 36.7% due to increased discounting in IMC; Adj. EBITDA margin improved 160bps YoY to 5.8% due to better operating leverage. While quarter’s performance was impacted by GST reforms and GlobalBees drag, strong brand positioning, rising home brand salience, and omni-channel presence, coupled with store expansion plans, position the company for a healthier growth and margin expansion ahead. We maintain ‘BUY’ rating with revised SoTP-based Sep’26 TP of INR 480.
India Multi-channel (IMC) impacted by delayed consumption: IMC segment saw GMV growth of 12% YoY (+11% QoQ), a miss on JMFe by 2%. Growth was driven by 12% YoY growth in transacting users, though order volume grew 7% only. The moderation in growth was mainly due to 1) delayed consumption in 2nd half of quarter due to GST reforms, 2) slowdown in offline business due to muted demand environment and closure of 38 COCO stores in 3Q. Revenue stood at INR 13.8bn, 7.9% YoY growth. While YoY growth has been muted, there has been improvement on sequential basis in both online and offline. We believe that moats for FirstCry remain intact with BabyHug being the largest childcare brand in the country and private labels accounting for c.55% of the GMV in FY25. Gross margin has declined 30bps YoY due to increased discounting to revive growth in late 2Q; however, Adj. EBITDAM saw a rise of 60bps YoY to reach 9.1% due to improved marketing efficiency. Management reiterated guidance of early-teens revenue growth in FY26 as 2H is expected to be much better. Growth is likely to be supported by store expansion in 2H as ~25 COCO stores have been added in 1H and management had guided for ~90-100 stores in FY26.
Profitable growth remains the key focus in International segment: International segment saw a GMV growth of 8.9% YoY (+16.4% QoQ), a beat of c.2% on JMFe. Revenue stood at INR 2.4bn, +13.3% YoY (+13.7% QoQ). Management reiterated its focus on optimising topline mix to yield superior GMV-revenue conversion and margin improvement. As a result, adjusted EBITDA margin expanded 11ppts YoY (+240bps QoQ) to reach -8%. Management believes its existing moats (brand strength, customer trust, and network effects) will sustain its long-term positioning. Company is planning to replicate its omni-channel strategy of IMC to International as well with 1st COCO store being opened in KSA in Aug’25.
GlobalBees sees drag from ‘Non-core’ brands: GlobalBees experienced slower revenue growth of 14% YoY to reach INR 4.9bn. Management has been deliberately reducing ‘Other brands’ to focus on ‘Core categories’, which have grown stronger at 30% YoY. However, rationalisation of ‘Other brands’ led to dragged margins with flattish Adj. EBITDAM at 2% resulting in Adj. EBITDA of INR 85mn. Adj. EBITDA from core brands has been at ~5% (post corporate expenses) in 1H. Rationalisation of brands is expected to complete in next couple of quarters post which growth and margins are expected to return to normalised levels. Others segment, which primarily includes Education, delivered INR 111mn in revenue, 22.3% YoY (+15.4% QoQ) growth.
