Here's why Go Fashion has rallied almost 10% this week

Go Fashion India is up around 10 percent this week and 13 percent this month. There are various reasons for the stock rallying but today's move can perhaps account for as unusual.

The key reasons are that the first quarter results of the company are impressive with five times revenue growth (on a low base) and same-store sales growth at 30 percent over pre-COVID basis.

The company has a strong brand with regards to Go Leggings etc. and has taken a price hike as a result of which the gross margins despite inflation have increased by around 420 basis points, the average selling price has been up by 9 percent in this quarter. It has added 30 new exclusive brand outlets. Total stores at around 533.

One, because the company gets over 70 percent of the revenues from them and they account for about 33 percent of EBITDA margins, as against the other parts of the business which are not as margin accretive.

The company has started a new warehouse in Bhiwandi, Maharashtra. And the western region of the country is known as the region for the consumers because there is a fair amount of consumption that takes place in the western part as against the other parts of the country and this would add, to their revenue, 120-130 new additional stores this year with improving business metrics working capital days down from 190 to 133.

Ad expenses will increase, but despite that, the margin guidance is at 31-32 percent versus 30 percent in the last year and online sales increased from 2.5 to 5 percent.