Bengaluru: India’s largest textile maker, Arvind Lifestyle Brands Ltd, said roughly 20% of its sales are done through either unorganized or multi-brand retail channels and that portion of its business has taken a 30-40% hit after demonetisation.
“Organized business (80%) it has not affected that much. The sector which has got seriously affected is the unorganized sector, the multi-brand stores, which is a lot into cash transactions – they have got severely affected because their financing, their payment to their workers, everything used to be in cash,” said J. Suresh, managing director and chief executive officer of Arvind Lifestyle Brands.
The firm is still on track to become a Rs5000 crore company by 2019—an internal target—and end-of-season sales in December aren’t expected to be affected by the drop in consumer demand. Revenue should grow by 30% this year and end up at around Rs3000 crore for the year, according to Suresh.
Still, he cautioned that there is no clarity on the full impact of demonetisation on the wider economy. “There is a little bit of disruption in the economy everywhere, particularly in the small towns, small shops, small industrial outlets. What impact that will have on the economy and then how that is going to impact the overall consumer demand going forward is a big question mark.”
Like many of his counterparts, Suresh agreed that demonetisation will benefit compliant businesses over a longer period of time. What is worrisome is the near-term hit and that’s a concern apparel and accessories brand Turtle Ltd also shares.
Sales at Turtle Ltd, backed by Future Group, known for its range of men’s shirts, were down 7% in November versus a year-ago. Before demonetisation, the company had estimated a 25% increase during the period. Ticket sizes also went down with the average bill size falling almost 28% during the month, its chief executive officer Amit Ladsaria said.
While Turtle’s sales have seen a pick up now, it’s nowhere near what it ought to be at, Ladsaria added.
Indeed, retail sales have picked up after a disastrous first week following demonetisation, but what has complicated matters is retailers had high expectations for the December quarter especially after a good monsoon and the Seventh Pay Commission’s payouts.
“Branded clothing in my mind is largely safe even in the short-medium term. In tier II and tier III cities, people generally get scared with uncertainty and pull back their spending very quickly. In urban centers, people with cards will continue to spend and for them clothing is a necessity. But end-of-season sale there should not be an impact across segments because people could see it as a reason to stock up,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.