Liberty Shoes Ltd Reports Sharp Quarterly Decline Amidst Challenging Market Conditions

Quarterly Financial Performance Deteriorates

In the December 2025 quarter, Liberty Shoes posted a profit after tax (PAT) of just ₹0.62 crore, marking a steep decline of 81.5% compared to its previous four-quarter average. This sharp fall underscores the company’s struggle to maintain profitability amid rising costs and subdued demand. Operating profit before interest and tax (PBDIT) also hit a low of ₹13.24 crore, reflecting margin compression and operational inefficiencies.

The operating profit to net sales ratio dropped to 7.32%, the lowest in recent quarters, signalling that the company is generating less profit from its sales revenue. This contraction in operating margins is a key concern for investors, especially in a sector where cost control and scale are critical for sustainable earnings growth.

Leverage and Working Capital Challenges

Liberty Shoes’ debt-equity ratio rose to 0.73 times at the half-year mark, the highest level recorded in recent periods. This increase in leverage raises questions about the company’s financial risk profile, particularly as interest coverage ratios have weakened. The operating profit to interest ratio fell to 3.47 times, indicating reduced capacity to comfortably service debt obligations.

Additionally, the debtors turnover ratio declined to 5.78 times, the lowest in the half-year period, suggesting slower collections and potential working capital stress. Such trends can strain liquidity and limit the company’s ability to invest in growth initiatives or weather market volatility.

Stock Price and Market Performance

Liberty Shoes’ stock price closed at ₹266.00 on 16 Feb 2026, down 5.99% from the previous close of ₹282.95. The stock has been under pressure over the past year, with a one-year return of -31.97%, significantly underperforming the Sensex’s 8.52% gain over the same period. While the five-year return of 87.59% outpaces the Sensex’s 60.30%, the recent trend highlights growing investor concerns amid deteriorating fundamentals.

The stock’s 52-week high was ₹474.80, and the low ₹210.05, indicating considerable volatility. The current price sits closer to the lower end of this range, reflecting the market’s cautious stance on the company’s prospects.

Financial Trend Shift and Mojo Score Analysis

Liberty Shoes’ financial trend parameter has shifted from negative to flat, signalling a stabilisation but no clear recovery in performance. The company’s financial performance score for the quarter fell further to -21 from -15 in the preceding three months, indicating worsening fundamentals despite the trend change.

The MarketsMOJO Mojo Score currently stands at 34.0, with a Mojo Grade of Sell, upgraded from a previous Strong Sell on 11 Nov 2025. This upgrade reflects a marginal improvement in outlook but still signals caution for investors. The market capitalisation grade remains low at 4, consistent with the company’s micro-cap status and limited liquidity.

Sector and Industry Context

Operating within the footwear sector, Liberty Shoes faces intense competition and margin pressures from both domestic and international players. The sector has seen mixed results recently, with some companies benefiting from rising consumer demand and others struggling with input cost inflation and supply chain disruptions.

Compared to its peers, Liberty Shoes’ deteriorating operating metrics and rising leverage place it at a disadvantage. The company’s ability to improve working capital efficiency and restore profitability will be critical to reversing its current downtrend.

Long-Term Returns and Investor Considerations

While Liberty Shoes has delivered a respectable 10-year return of 105.72%, this lags the Sensex’s 259.46% gain over the same period, highlighting underperformance relative to the broader market. The three-year return of 10.05% also trails the Sensex’s 36.73%, underscoring the company’s challenges in recent years.

Investors should weigh the company’s current financial stress against its historical resilience and potential for turnaround. The recent margin contraction and liquidity concerns warrant a cautious approach, especially given the footwear sector’s competitive dynamics.

Outlook and Strategic Imperatives

Looking ahead, Liberty Shoes must focus on stabilising its margins and improving operational efficiency to regain investor confidence. Addressing working capital management and reducing leverage will be vital to strengthening the balance sheet and supporting sustainable growth.

Given the current financial metrics and market conditions, the company faces an uphill task to reverse its recent underperformance. Strategic initiatives such as product innovation, cost optimisation, and market expansion could provide avenues for recovery, but execution risks remain significant.

Investors should monitor upcoming quarterly results closely for signs of margin improvement and debt reduction before considering a more optimistic stance on the stock.

Summary

Liberty Shoes Ltd’s December 2025 quarter results reveal a company grappling with shrinking profits, margin pressures, and rising financial risk. Despite a slight improvement in the financial trend parameter, key indicators such as PAT, operating profit, and interest coverage have deteriorated to concerning levels. The stock’s recent price performance and Mojo Grade of Sell reflect these challenges, underscoring the need for cautious investor appraisal amid a competitive footwear sector landscape.

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