Mumbai: Textiles maker and retailer Raymond Ltd expects its apparel division revenue to jump 30% in FY11 even as it plans to raise prices by 5-10% next quarter to offset cost-push, a top official said.
The company, which sells apparel brands such as Manzoni, Park Avenue, Parx and ColorPlus, had revenues of Rs 800 crore from its apparel division in 2009/10, Shreyas Joshi, president of Raymond Apparel Ltd, said in an interview to Reuters on Thursday.
Apparels division, which contributes roughly a third to Raymond’s total revenues, will grow on the back of rising consumer demand, higher prices and store expansion, Joshi said on the sidelines of a fashion event.
“Next year also we have plans for expansion and growth and value proposition. We will be opening more stores and focussing on expanding in class four and five towns,” Joshi said.
The division, which had sales of Rs 180 crore, grew at 29% in the quarter to December and its earnings before interest, tax, depreciation and amortisation (EBITDA) grew two-fold in the period, the firm had said in late January.
Its textiles sales grew by a fifth to Rs 480 crore.
“Branded apparel continues to grow and we expect the momentum to sustain with increasing retail penetration. ColorPlus as a brand is reviving and clocked EBITDA margin of 15% in December quarter,” MF Global Research, which has a ‘buy´ rating on the stock, said in a note to clients in January 2010.
The company expects margins to stay under pressure on soaring cotton prices and it will raise prices by 5-10% in the June quarter to offset cost increases.
“Of course, there is pressure on margins. If raw material prices hit the roof like this, there will be pressure,” Joshi said.
“We have not been able to even gauge where this rise is going to stop but we certainly know we have to get into some kind of a compensatory mode to arrest dip in margins,” he added.
US cotton futures rallied on Thursday to a record high of $2.0402/lb, up 3.6%, as mills rushed to fix prices on cotton bought on-call before the upcoming delivery date for March futures.
In India, the world’s second biggest producer and exporter of the fibre, prices of the most common Shankar-6 variety hit record high of Rs 60,000 per candy of 356 kg last week. The price has more than doubled in the past year.
“Prices have gone up and still there is no respite. They are still rising,” Joshi said. “All the players in this space are getting affected. We don’t see prices getting arrested. So, there is no option but to go up on prices.”
Shares in the firm ended up 3.29% at Rs 301.55 in the Bombay Stock Exchange, which ended up 1.13 %.