Apparel market could return to normalcy by H2FY22, says chairman Birla
The covid-induced lockdown led to unprecedented disruption in retail sector, Birla said
NEW DELHI :
India’s apparel market could return to normalcy by the second half of FY22 led by favourable macro factors, increased adoption of digital technology and the underlying trend of value migration from the unorganized to the organized sector, said Kumar Mangalam Birla, chairman, Aditya Birla Fashion and Retail Ltd (ABFRL), at the company’s 14th annual general meeting on Thursday.
Despite India’s apparel retail business suffering a severe blow following the pandemic outbreak as temporary lockdowns shrunk consumer appetite for formal and occasion wear, ABFRL expects to breach the ₹25,000 crore revenue mark within five years, Birla said, while responding to queries from shareholders.
ABFRL is among the largest organized apparel retailers in India with a portfolio of brands comprising Louis Philippe, Van Heusen, Allen Solly and Peter England, besides Pantaloons . It also retails fast fashion brand Forever 21, American Eagle, Ralph Lauren, Hackett London and Ted Baker, among others. In FY21, it reported consolidated net revenue of ₹5,249 crore, down from ₹8,788 crore in the year-ago period. The company had over 3,210 stores in India as on 31 March, according to its annual report.
The lockdown following the covid outbreak in March 2020 led to “unprecedented disruption" in the retail sector, Birla said. “The calibrated unlocking of the economy started in June under stringent safety protocols. However, recovery post resumption was swift, with consolidated sales in Q4FY21 closing almost at the same levels as Q4FY20," he added.
The company was also burdened with debt as temporary store closures resulted in revenue loss. “Like other retailers globally, the unprecedented disruption at the start of the fiscal year posed a very challenging financial situation to begin with. Dwindling revenues on account of the shutdown meant losses were imminent. And this put a temporary strain on the balance sheet as the company’s debt peaked upwards of ₹3,000 crore at the end of Q1FY21," he said. Subsequently, the company worked around its cost structure, negotiated rentals with malls and high-street store owners and liquidated inventory to reduce the debt burden, he added.
“First, we reimagined our cost structure and worked with our real estate partners and material vendors to realign legacy costs. Our team did an exceptional job pulling this off by reducing our peak cost base by ₹1,200 crore. Second, the team calibrated our working capital position, reworked the buys and aggressively liquidated inventory through multiple channels without resorting to any incremental discounting. This enabled a record working capital release of ₹750 crore," he said.
ABFRL also raised equity of ₹2,500 crore through a combination of rights and preferential issues. Its net debt as on March stood at ₹654 crore, down from ₹2,511 crore in FY20.
During the year, the company expanded its presence in the ethnic wear segment with investments in Sabyasachi and Tarun Tahiliani. The move was in line with its plans to gain a stronger foothold in the ethnic wear segment, as it was a “clear area of focus".
“Ethnic is the largest segment in the fashion and apparel sector with a significant profit pool. It is also a sector that has strong resilience to apparel cycle fluctuations and is least impacted by competition from global brands," added Birla.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!