Wakefit Innovations Concall Summary: Key Highlights and Q3 FY26 Results

Guidance & Outlook

• Revenue Outlook: Management expects to close FY26 with mid- to high-teen revenue growth, and said Q4 has started stronger than Q3 across key operating metrics.
• Q3 Normalization View: Management framed Q3 as timing-distorted rather than demand impaired, citing 14% YoY growth for Sep–Dec 2025 and a stronger Republic Day event, with demand normalizing after festive and GST-related disruption.
• A&P Reinvestment: Advertising and promotion spend is currently at a mid-5% of sales run-rate, but management intends to move this back toward the historical 8%–9% of sales range due to rising competitive intensity, especially in mattresses.
• Margin Trajectory: Management expects continued operating EBITDA margin improvement, but indicated future expansion will be moderated by stepped-up brand investments and category mix.
• Furniture Margin Inflection: The key source of future nonlinear margin expansion is expected to be furniture, driven by catalog optimization, manufacturing utilization, and better middle-mile logistics absorption.
• Store Expansion Pace: Store rollouts are expected to accelerate next fiscal, with management indicating additions could be ~50% higher than the Q3 run-rate.
• Category Growth Priorities: Mattresses are expected to grow at least in the mid- to late teens, while furniture remains the main long-term growth engine given its much larger addressable market.

Capex & New Projects

• Omnichannel Expansion: Wakefit operated 137 active COCO stores across 76 cities and about 1,700 MBOs across 453 cities as of Dec’25, with COCO expansion remaining central to the growth strategy.
• Store Network Growth: The company added 11 net stores during the quarter and said next year’s store opening pace will be meaningfully higher.
• IPO-linked Expansion Funding: Of IPO proceeds, about INR 161cr is earmarked toward lease, sublease, rent and license fee payments over the next 3 years, supporting offline scale-up.
• Manufacturing Footprint: Wakefit operates five manufacturing facilities with automated production lines, which management highlighted as a core structural advantage.
• Furniture Production Model: Furniture continues to be run on a catalog-led, made-to-order basis, limiting inventory build and supporting cash flow efficiency.
• Channel Expansion Logic: MBOs remain a low-capex route for entering new markets, while COCO stores are prioritized for margin, customer experience, and data capture.

Financial Performance

• Q3 Revenue: Revenue rose to INR 4,213m, up 9.4% YoY, marking the company’s highest-ever quarterly revenue.
• Q3 EBITDA: Reported EBITDA excluding non-operating income stood at INR 591.8m, with a margin of 14.0%, up almost 196% YoY.
• Operating EBITDA: On management’s preferred operating view, EBITDA was INR 416.4m, or 9.9% margin, versus INR 79.7m and 2.1% margin in Q3 FY25.
• Q3 PAT: PAT was INR 319m, with a 7.6% margin, after including one-time impacts from Labour Code changes (INR 39.3m) and IPO expenses (INR 10.1m).
• 9M Revenue: Revenue for 9M FY26 increased to INR 11,453m, up 17.9% YoY.
• 9M EBITDA / PAT: Reported 9M EBITDA was INR 1,454m with 12.7% margin, while PAT stood at INR 674m, or 5.9% margin.
• Liquidity: The company ended Dec’25 with investable cash of around INR 8,892m, including IPO proceeds, giving it ample balance sheet capacity for expansion.

Operational Highlights

• Category Mix: Mattresses contributed 61.3% of 9M revenue, furniture 29%, and furnishings 9.7%, with furniture growing 27.5% YoY on a smaller base.
• Profit Engine vs Growth Engine: Management described mattresses as the most profitable category, while furniture is positioned as the key long-term growth and margin leverage engine.
• Gross Margin Improvement: Q3 gross margin improved by 230 bps YoY, driven by better factory execution, higher machine and manpower utilization, and lower wastage.
• Owned-channel Mix: Owned channels, including the website and COCO stores, contributed 64.7% of 9M sales, reinforcing Wakefit’s direct-to-consumer economics.
• Store Productivity: Same-store sales growth for stores older than one year is running at above 20%, and offline AOV is 60%–65% higher than online due to consultative selling and upselling.
• Customer Retention: Repeat customers account for about 35% of the base, which management cited as proof of strong lifetime value and brand stickiness.
• ROE Expansion: ROE improved to 24.5%, from 23.2% in FY25 and 10.7% in FY24, driven by operating leverage and disciplined capital allocation.

Business & Strategy Updates

• Q3 Timing Distortion: Management said Q3 growth was dampened by Diwali demand shifting into September and a temporary post-GST shift in consumer wallet share toward categories benefiting more directly from GST cuts.
• Festive Category Behavior: Mattress demand saw a weaker-than-normal festive spike, while furniture remained more stable because its festive uplift is structurally lower and less event-dependent.
• Operating Model Advantage: Management emphasized a full-stack vertically integrated model spanning R&D, manufacturing, supply chain, and distribution, which it believes is a durable competitive advantage.
• Furniture Scalability: Furniture is expected to become a larger part of the portfolio over time, given that the furniture market is nearly 10x the size of the mattress market and Wakefit remains well under 1% of the combined opportunity.
• Marketing Strategy: Management uses A&P as the key reported demand investment metric rather than CAC, given attribution limitations across marketplaces, quick commerce, and MBO channels.
• Online vs Offline Economics: Wakefit argued that its owned offline model supports premiumization and better economics than legacy dealer-led distribution, especially in mattresses.
• Management Update: The Board approved the appointment of Parul Gupta as CFO, replacing Navesh Gupta, whose last working day was Dec 31, 2025.