Branded apparel makers: Hopes pinned on festive season
- First 2-3 years of RERA transition period will be really painful: MahaRera chief
- Kwan Entertainment launches sports, media and consumer unit Kwanabler
- Congress disowns Khurshid’s ‘blood on hands’ remark
- Edelweiss arm to help sell office space in Parinee Group’s project in Mumbai
- Karnataka elections: BJP picks Reddy aide to fight Siddaramaiah
Branded apparel makers, whose business has been unsettled by e-commerce discounts and subdued consumer sentiments, saw no signs of revival in the July-September quarter (Q2).
In an event organized by Ambit Capital Pvt. Ltd, leading branded apparel companies pointed to weakness in consumer sentiments and continuing business readjustments.
According to an Ambit Capital report on the event, Aditya Birla Fashion and Retail Ltd said consumer consumption remained muted and there was no evidence of revival in sentiments in Q2. Shoppers Stop Ltd echoed those views saying their revenues are yet to see any impact of good monsoons. Zodiac Clothing Co. Ltd opined the current industry downtrend is worse than the one in 2009-10.
On the positive side, companies said e-commerce discounts have reduced in Q2. While they are wary of the ongoing online sales campaigns, Aditya Birla Fashion sees relatively low discounting in the rest of the year due to brand owners aversion to such strategy, according to the report.
Further, most expect the business restructuring measures and festive season to lift sales in the second half of the fiscal year. “(Zodiac) management is hopeful of a pickup in 2HFY17 on the back of a strong monsoon and hopes of an upturn during the festival season. Immediate indications have been visible—upsurge in export order book after having been disappointing for the last 2 years,” Ambit Capital said in a note.
The commentary should comfort investors who otherwise are worried about the sliding fortunes of the industry. But the comments also show normalcy is some time away.
First, sales continue to remain muted. The recovery assumption is highly dependent on the festive season, monsoon crop harvest and recovery in incomes. Also it is not yet clear how discounting will pan out in the festive season. If sales do not pick up as expected, market participants may as well step up promotions.
Second, companies are still in the painful readjustment processes of expanding stores, production revamps and brand expansions. This means costs and business investments can remain high and potentially suppress earnings for some time.
Aditya Birla Fashion recently entered the innerwear segment under the Van Heusen label. Raymond Ltd is investing in stores. Shoppers Stop plans to increase share of private labels in its business. Future Lifestyle Fashions Ltd plans to step up investments in design teams and strengthening supply chain for its power brands.
While most stocks are reflecting these concerns—shares of Aditya Birla Fashion, Zodiac and Shoppers Stop are trading below their year ago levels—a lot depends on the sales recovery in the second half of the current fiscal year.