An analysis stated that the organised retail apparel sector is predicted to see 8–10 per cent sales increase this fiscal year because to the wedding and celebration seasons as well as consumers’ growing inclination for quick fashion.
In light of increased demand from a normal monsoon, declining inflation, the upcoming holiday and wedding seasons, and consumers’ growing inclination towards fast fashion—cheap, stylish clothing that imitates high fashion designs and popular styles—the organised retail apparel sector is expected to see revenue growth of 8–10 per cent this fiscal year, according to a report from Crisil Ratings.
Retailers would be cautious when opening new locations, the survey stated, as revenue growth will be less than the compound annual growth rate of 11–12 per cent observed between fiscals 2018 and 2023.
In order to keep their operating margin at 7.2–7.4 per cent despite ongoing high marketing spending, retailers will instead concentrate on improving efficiency at their current locations, lowering costs, and reducing their dependency on external debt, it continued. The mass market is the largest segment in the retail garment business, followed by the premium and luxury segments.
A developing segment of the mass market known as “fast fashion” provides the newest styles, which are changed seasonally and delivered to clients faster.
According to the survey, in response to changing consumer behaviour, retailers are focussing on new trends, especially in quick fashion, improving supply chain efficiency, and modifying their business strategy.
Retailers will be careful when expanding stores in big urban areas as customer spending is changing towards luxury items and travel experiences. Meanwhile, they will keep expanding in Tier-2 and 3 cities, which are moving towards organised retail.
Crisil Ratings added that a major increase in profitability will be impeded by the moderate growth in same-store sales, which is likely to keep revenue density at Rs 11,900 per square foot.
Better inventory management and consistent input costs, the research claims, will avoid large inventory write-offs, in contrast to the previous fiscal year when large cost movements reduced profitability by 100–110 basis points.
Adequate debt metrics can be achieved by maintaining a steady cash flow and minimising the need for debt financing store expansion. According to the report, clothing retailers’ interest coverage and total debt/Ebitda (earnings before interest, taxes, depreciation, and amortisation) ratios in 2024–2025 are anticipated to be 6.2 times and 1.7 times, respectively, comparable to the previous fiscal year.
