From market darling to wealth destroyer: This footwear stock has lost 72% of its value from peak. Can it rebound?

Stock market today: Market volatility is a normal part of investing, with stock prices often rising or falling in response to changing business fundamentals, economic conditions, or investor sentiment. At times, negative triggers such as earnings slowdown, tepid consumer demand, or margin pressure can weigh heavily on specific stocks.

Relaxo Footwear is one such stock in this regard, having faced prolonged selling pressure that has led to a sharp decline in its share price and substantial erosion of shareholder wealth.

The company’s shares have closed in the red for 14 out of the last 19 months, losing 58% of their value to trade at the current level of ₹415 apiece. This crash has also brought the stock to trade 72% lower from its all-time high of ₹1,448, which it had reached in November 2021. Since reaching its peak, the stock has remained under significant pressure, closing 26 out of the last 41 months in negative territory.

For context, the stock had seen a one-way rally between December 2016 and October 2021, resulting in a massive gain of 565%.

Relaxo Footwear has reported a weak set of numbers over the last few quarters, with the latest December quarter results also missing Street estimates, impacted by weak volume growth. The continued drop in volume growth was largely due to weak consumer demand in the mass and value segments.

Over the past few quarters, the company has also been facing competitive pressure from unorganised retailers, as the company has positioned itself as a mass-market, value-for-money brand—segments that account for about 70% of the total footwear industry.

The company is currently working on revamping its distribution system by consolidating its distribution network, which has led to a temporary loss in volume market share. However, the management expects the benefits of these efforts to materialise over the next 2–3 quarters.

Will cost optimization and premiumization lift Relaxo’s sales?

Domestic brokerage firm Axis Securities remains cautious on Relaxo Footwear in the short to medium term, citing a sluggish demand environment, rising competition from unorganised players, and fluctuations in operating costs that continue to impact profitability—despite ongoing cost-saving efforts.

While the brokerage sees a favorable long-term outlook, supported by initiatives such as cost optimization, BIS implementation benefiting organized players, the rollout of a Distribution Management System (DMS), and a premiumisation strategy targeting high-growth sports and athleisure segments, it believes that the benefits of these measures are likely to take time to reflect in financial performance.

Meanwhile, Motilal Oswal noted that a gradual recovery in rural demand will be crucial for Relaxo’s volume growth. The brokerage also pointed out that a rebound in the open-footwear category, improvement in ASPs led by a better product mix, and a rising share of closed footwear—especially in the sports and athleisure segment—are key drivers for the company’s future growth.

Technical Outlook: Analyst foresees further downside risk

Anshul Jain, Head of Research at Lakshmishree Investment and Securities, said, Relaxo has been in a persistent downtrend, correcting for 41 months and shedding over 72% from its all-time high. On the weekly chart, it has formed a tight five-week consolidation, appearing more like a pause than a reversal. The recent pullback to the 10 and 20-day EMAs now looks exhausted. A breach and sustained move below the box lows of 395 could trigger the next leg down. With no visible accumulation or strong volume support, the structure suggests this is a continuation of the dominant bearish trend. Caution is advised on fresh longs."

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.