The revenue of brick-and-mortar apparel retailers is likely to grow 7-8 per cent this year, primarily owing to the festive season and marriage season, ratings agency CRISIL said.
However, it is anticipated that the revenue density would stay below the pre-pandemic level when expressed as revenue per square foot.
According to a CRISIL publication based on the examination of 39 retailers, store development, including in Tier-2 and Tier-3 cities, will support the sector’s growth in the medium term. In 2023–2024 (FY ’24), the rate of store area growth will return to its pre–pandemic level of 2.2 million square feet. This was 3.7 million square feet in FY ’23.
“While store expansion in metros and Tier-1 cities will continue, retailers are also expanding to Tier-2 and Tier-3 cities, which will be relatively smaller-sized outlets. Hence, the pace of area addition will normalise to pre-pandemic levels this year,” CRISIL added.
Because of an improved product mix that favours the premium segment and lower input prices, these retailers’ operating margins are predicted to be approximately 8 per cent in FY ’24, offsetting the effects of greater marketing expenditures.
