Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

CRISIL Ratings: Apparel retailers to grow 7-8% this fiscal via expansion, festival spur

Posted On: 2023-09-20 16:08:52 (Time Zone: IST)

Moderating input prices to offset impact of higher marketing spends keeping margins stable

Organised sector brick & mortar apparel retailers are set to sew 7-8% revenue growth this fiscal, buoyed by festival and marriage season demand, and despite inflation impacting discretionary spending in the first quarter. Continued store expansion, including to Tier II and III cities, will also help growth this fiscal and over the medium term.

Despite the moderation, revenue growth will be comparable to the ~8% range seen before the pandemic.

Last fiscal, retailers had stitched a strong 38% growth on a low base, driven by swift recovery from the pandemic-induced slump and higher realisations following a steep increase in raw material prices, which was passed on.

Operating margins1 are seen 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 pace of store area addition will normalise to the pre-pandemic level of ~2.2 million square feet2 in fiscal 2024, compared with ~3.7 million square feet last fiscal. This, and steady accrual will limit reliance on external debt and keep credit risk profiles 'Stable'.

A CRISIL Ratings analysis of 39 organised apparel retailers it rates, which accounted for a fourth of the ~Rs 1.9 lakh crore revenue last fiscal, indicates as much.

Says Anuj Sethi, Senior Director CRISIL Ratings, "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".

Last fiscal, despite strong growth, revenue density (calculated as revenue per square feet) was below the pre-pandemic level (see chart in annexure) due to substantial area added under new stores. The metric is expected to improve this fiscal with the pace of area addition normalising and demand from the premium category - the high-end apparels and ethnic wear segments - rising. Yet, overall revenue density will remain below the pre-pandemic peak of ~Rs 11,700 per square feet.

Additionally, the share of online sales in overall revenue, which doubled to ~8% last fiscal from pre-pandemic levels, is expected to stabilise as consumers mix online and physical shopping.

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/ discounts to boost consumer sentiment and revive discretionary spend.

While store expansion in metros and Tier I cities will continue, retailers are also expanding to Tier II/III cities, which will be relatively smaller-sized outlets. Hence, the pace of area addition will normalise to pre-pandemic levels this fiscal. That, coupled with continuing investments to augment technology platforms and omni-channel infrastructure for online offerings, will keep annual capital spending at last fiscal's level of ~Rs 2,000 crore.

Says Shounak Chakravarty, Associate Director, CRISIL Ratings, "While the capex will be partly debt funded, stable cash flows will ensure debt metrics remain adequate, lending stability to credit profiles. We expect interest coverage and total debt/Ebitda (earnings before interest, taxes, depreciation, and amortisation) ratios of CRISIL Ratings rated apparel retailers to remain in line with previous fiscal's level of ~8 times and 1.5 times, respectively."

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Gas Utilities : Gas consumption at record highs, growth now to trickle - Kotak Institutional Equities

Emkay and Geojit increase target prices of LIC, expect over 20% upside

CRISIL Ratings: Mall area to rise by 35% over the medium term on retail surge

Crop & Chemical Dashboard: Bottom is near, recovery unclear - Kotak Institutional Equities

Loan sell-downs of personal loan pools may see a temporary pause following the RBI's decision to increase risk weights: ICRA

India Surges Ahead in 5G Deployment, Paving the Way for a High-Tech Future!

CRISIL Ratings: Construction equipment revenue to grow 14-15% this fiscal

India to contribute 22% to the Global ER&D sourcing market by FY30: BCG-nasscom Report

CRISIL Ratings: In a decadal first, revenue of agrochemicals makers to slip ~3% on tepid demand this fiscal

CRISIL Ratings: Flexible packaging industry stares at decadal low profitability as oversupply stings

CRISIL Ratings: Domestic demand, softer cotton prices to sustain RMG growth

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%

CRISIL Ratings: For tea companies, ~8% revenue degrowth brewing this fiscal

CRISIL Ratings: Revenue of paper makers to crumple 8-10% this fiscal

ICRA expects banking sector to stay resilient, outlook remains Positive

CRISIL MI&A: Red-hot domestic demand to stave off steel price melt this fiscal

CRISIL Ratings: Replacement demand to drive tyre volume up 6-8% this fiscal

CRISIL Ratings: Home textiles makers to weave revenue, profitability rebound this fiscal

Capital outlay on roads, renewables seen rising ~35% in this and next fiscals to Rs ~13 lakh cr, backed by strong execution pace

Softening demand to moderate Indian IT services industry growth to 3-5% in FY2024: ICRA

CRISIL Ratings: Telcos may dial up Ebitda 15-17% to Rs 1.2 lakh crore this fiscal

CRISIL Ratings: Social welfare spend of states to hit a decadal high this fiscal

CRISIL Ratings: Footwear sector revenue to tread ~11% higher this fiscal

CRISIL Ratings: Robust demand to whip up dairy industry revenue 14-16%

Indian hospital industry's operating profit margin will remain healthy at over 22% in FY2024: ICRA

Weak overseas demand to snip 5-6% off jute revenue this fiscal - CRISIL

ICRA expects the telecom services industry to report moderate revenue growth of around 7-9% in FY2024 amid high capex spends

CRISIL - Viscose staple yarn makers set for 10-12% revenue growth this fiscal

Sugar mills seen unscathed despite pricier cane, lower exports - CRISIL

CRISIL Ratings: Specialty chemicals on domestic drive, revenue seen growing 6-7%

CRISIL Ratings: Higher ad spends to lift revenue 13-15% for print media this fiscal

Paytm: Top brokerages, such as ICICI Securities, Axis, Dolat lift Paytm's target price to Rs. 1250

CRISIL Ratings: Securitisation volume surges 60% to first-quarter peak

CRISIL Ratings: FMCG sector to witness 7-9% rise in revenue this fiscal

CRISIL MI&A and ATMA: Tyre industry on a roll, driving towards doubling in size

CRISIL Ratings: Slowing US, EU to chip 6-8% away from handicraft sales this fiscal

CRISIL MI&A: One out of five MSMEs to see stretch in working capital days

Yes Securities Identifies Rural India as Key Driver of Economic Recovery in Latest Report

CRISIL Ratings: Revenue of automotive component makers to grow 10-12% this fiscal

CRISIL: Residential real estate sales to grow 8-10% this fiscal

CRISIL MI&A: Cement prices to dip 1-3% this fiscal despite healthy demand

CRISIL Ratings: Aircraft MRO services revenue could leap 3x in 5 fiscals

Demand pressures to moderate revenue growth of Indian fashion retail entities to 10% in FY2024: ICRA

CRISIL Ratings: Revenue of organised gold jewellers to rise 16-18% this fiscal

CRISIL Ratings: Revenue of top 18 states to grow at 6-8% this fiscal

Automobile Sector - Monthly Quick View - May'23 - Steady YoY and MoM Growth on Low Base; UVs are Clear Winner...

CRISIL Ratings: New guidelines lend much-needed clarity to FLDG usage

MSP for kharif crops - Views of Pushan Sharma, Director - Research, CRISIL Market Intelligence and Analytics

PMI Services logs a record high, Employment scenario, however, remains a concern

Road construction to witness 16-21% jump in FY2024, ahead of General Elections: ICRA

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020