Apparel retailers to grow 7-8% this fiscal: Crisil | Mint
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Business News/ Industry / Retail/  Apparel retailers to grow 7-8% this fiscal: Crisil
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Apparel retailers to grow 7-8% this fiscal: Crisil

Demand from the premium segment is rising gradually with consumers increasingly preferring branded garments, driven by return to office and buoyant corporate activity

Last fiscal, retailers had registered a 38% growth on a low base (File photo: Mint)Premium
Last fiscal, retailers had registered a 38% growth on a low base (File photo: Mint)

New Delhi: Offline clothing retailers are set to report 7-8% revenue growth in FY24 helped by festival and marriage season demand and a step up in store expansion, according to a note by ratings firm Crisil released on Wednesday.

Crisil analysed 39 organised apparel retailers that accounted for a fourth of the 1.9 lakh crore revenue last fiscal for the industry. Meanwhile, moderating input prices will help offset impact of higher marketing spends keeping margins stable, it said.

Last fiscal, retailers had registered a 38% growth on a low base, driven by pent-up demand post the pandemic slump and higher realizations following a steep increase in raw material prices, which was passed on to shoppers.

“Demand from the premium segment is rising gradually with consumers increasingly preferring branded garments, driven by return to office and buoyant corporate activity. This is helping offset muted-to-low demand from the economy and value segments (60% of total revenues) because of changes in discretionary purchasing decisions, including due to rise in food inflation, in the recent past. With continuous store expansion, and the onset of the festive and wedding season, demand should improve materially in the third quarter (~35% of annual revenues) and a part of the fourth quarter, supporting revenue growth," said Anuj Sethi, senior director, Crisil Ratings.

Meanwhile, the report said the pace of store area addition will normalise to the pre-pandemic level of 2.2 million square feet in fiscal 2024, compared to 3.7 million square feet last fiscal. Additionally, operating margins are expected to be rangebound at 8% this fiscal, as improving product mix in favour of the premium segment and lower input costs offset the impact of higher marketing spends, the report said.

“Operating margin is seen at previous year’s level of 8% despite significant reduction in prices of key raw material i.e. cotton; it has corrected 20% in the first four months of fiscal 2024, over average of fiscal 2023. This is largely due to continuing aggressive marketing strategy including various offers to boost consumer sentiment and revive discretionary spend," the report added.

Additionally, Crisil expects the share of online sales in overall revenue to stabilize this fiscal as consumers mix online and physical shopping. Crisil expects capex on store expansions this fiscal to be similar to last year’s levels at 2,000 crore.

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Published: 20 Sep 2023, 03:51 PM IST
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