Increasing raw material and logistic costs resulted in a consistent decline in home furnishing exporters’ operating margins since Q2 of FY 2022.
ICRA, an Indian independent and professional investment information and credit rating agency expects a double-digit contraction in turnover as well as moderation in margins for home textile exporters in FY of 2023, following all-time high sales and profits in FY 2022.
Rising inflationary concerns, the resultant slowdown in consumer discretionary spending, uncertainty on economic growth outlook and cautious buying by retailers to manage inventories are affecting sales in key export markets.
Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA, said, “As the demand scenario has normalised and inflation is exerting pressure on consumer discretionary spending, ICRA expects home textile companies to report a contraction in turnover in FY 2023. In 7M of CY 2022, US retail sales for furniture and home furnishing stores have grown at a rate of 2 per cent Y-o-Y, with a Y-o-Y de-growth of 2 per cent reported for the most recent month viz. July 2022. Slower-than-expected sales have resulted in higher-than-average inventory levels in recent months (June and July 2022).”
Jayanta further added that as a result, ICRA expects retailers to go slow/cautious on buying in the subsequent months to rationalise their inventory levels. This is corroborated by the slow offtake being experienced by domestic exporters, despite healthy order book trends witnessed till a few months back.
