Interloop Limited closed FY26 with revenue of US$654 million and is targeting revenue growth of 10–11% in US dollar terms for FY27. Management expects the company’s gross margin, which stood at approximately 23% last year, to remain stable or improve, supported by better capacity utilisation, operational efficiency, an improved customer mix and stronger pricing negotiations.
However, cotton supply constraints, US tariffs, freight expenses and uncertainty surrounding external market conditions remain key risks to the textile exporter’s outlook. While denim profitability has improved and apparel losses are narrowing, the pace of recovery in the apparel segment will remain an important factor in the company’s performance.
Interloop Revenue Mix Shifts Beyond Hosiery
Hosiery remains Interloop’s largest business segment, accounting for 62% of sales in FY26, compared with 69% a year earlier. The changing revenue mix reflects the growing contribution of other product categories.
Apparel accounted for 17% of sales, while denim contributed 15%. Yarn represented approximately 6%, and activewear remained a relatively small segment at 1%.
Geographically, Interloop’s sales are diversified across major international markets. Europe accounts for 46% of sales, the United States contributes 45%, and Asia and other markets make up the remaining 9%.
This geographic spread provides access to multiple export markets, although the company remains exposed to changing trade policies, consumer demand and logistics costs in its principal destinations.
Apparel Recovery and Denim Profitability Support Growth
Interloop’s apparel and denim businesses are showing signs of improvement. Denim has turned profitable, while apparel losses have approximately halved so far in FY27, according to management.
The company expects apparel to reach gross-level break-even during FY27, with net-level break-even targeted within approximately two years. Management also aims to double apparel revenue over the next two years.
Over the longer term, Interloop sees potential to build its apparel business into a US$200–250 million operation, with gross margins approaching 20%.
These targets indicate the importance of improving the performance of newer and expanding product categories as the company seeks to diversify beyond its established hosiery business.
Existing Capacity Offers Scope for Revenue Expansion
Interloop estimates that its current production capacity can support significant revenue across its product segments, subject to operational requirements and investment.
The company estimates potential revenue of approximately US$135–140 million from denim and US$160–170 million from apparel with relatively minor balancing investments. Activewear has estimated revenue potential of around US$15 million.
Realising this capacity will depend on customer demand, order volumes, production efficiency and the company’s ability to improve profitability in its expanding segments.
Management’s broader FY27 growth target also relies on maintaining margins while increasing utilisation and securing better pricing arrangements with customers.
Cotton Supply Constraints Increase Import Dependence
Pakistan’s cotton output has roughly halved in recent years, creating a more challenging sourcing environment for textile manufacturers. Interloop now procures approximately 70% of its cotton locally and imports the remaining 30%.
Local cotton continues to meet requirements for coarser counts used in hosiery and denim, but reduced domestic availability has increased the importance of imported supplies.
Higher imported-input costs can put pressure on production expenses, particularly when combined with currency movements and international price volatility. Cotton prices therefore remain an important factor in Interloop’s ability to protect margins.
US Tariffs and Freight Costs Remain Key Risks
Interloop’s exposure to international markets makes trade policy and logistics costs important considerations for FY27.
Management highlighted US tariffs as a continuing concern, noting that they remain stable but continue to weigh on demand. The company also flagged uncertainty surrounding GSP status, regional conflict-related disruptions, freight charges and imported-input costs.
Nearly all of Interloop’s exports are conducted on a free-on-board (FOB) basis, limiting the company’s direct exposure to outbound freight charges. However, higher shipping costs can still affect customers and influence purchasing decisions, while increased freight and input costs can affect the wider supply chain.
The outlook will therefore depend partly on international demand, trade arrangements and the extent to which higher costs can be managed through operational improvements and pricing negotiations.
Solar Expansion Helps Manage Energy Costs
Interloop has expanded its solar power capacity to 21 megawatts (MW), supporting its efforts to manage energy expenses.
Management indicated that energy costs remained flat as a proportion of sales despite higher oil prices. Maintaining this position could help protect margins as the company expands production and navigates a challenging operating environment.
Operational efficiency, improved capacity utilisation and energy management are expected to remain important elements of the company’s margin strategy.
Interloop FY27 Outlook Remains Constructive but Cautious
Interloop’s FY27 outlook combines a targeted 10–11% increase in US dollar revenue with an expectation that gross margins will hold at or above the approximately 23% level recorded in FY26.
Improving denim profitability, narrowing apparel losses and the potential to expand revenue from existing capacity offer opportunities for growth. However, cotton supply constraints, tariffs, GSP-related uncertainty, freight costs and currency movements remain external risks.
The company’s ability to meet its targets will depend on translating capacity and diversification plans into profitable sales while maintaining cost discipline in a challenging export environment.