Based on network expansion, fashion retailers might see revenue growth of up to 15 per cent in FY ’25, according to a report by ratings agency Icra.
Icra stated that despite inflationary headwinds, the network growth of fashion retailers would support revenue increases in the current fiscal year and provided a “stable outlook” for the fashion retail category.
The sample set of companies’ operating profit margins (OPM) are expected to stay between 13 and 14 percent in FY 2025. This is in spite of a strong 14–15 per cent YoY (Year-on-Year) revenue growth that is anticipated for the year, helped along by network expansion, the statement stated.
Given that Q3 of this year is when the festive season is expected to occur, Icra anticipates fashion retailers to report a slight increase in sequential sales in Q2 of FY 2025.
Due to inflationary pressures, the fashion retail category has been seeing a decrease in demand since Q4FY23. Nonetheless, fashion retailers in Icra’s sample set reported YoY sales increase of 18 per cent in Q1 FY ’25, driven by new product category introduction and store network expansion.
The value fashion sectors showed some encouraging growth and reached their pre-pandemic level for the first time, but the premium segment reported a 3 per cent decline in average sales per square foot (ASPSF) in the June quarter.
However, on a year-over-year basis, the margins of fashion retailers stayed unchanged, indicating lower-than-commensurate returns because of higher A&P expenses, which went mostly towards opening new stores and launching new categories, the report stated.
