Ratings agency ICRA has assigned a 'Negative' credit outlook on the value and lifestyle fashion retailers as it expects their revenues to decline by 35-42 per cent in FY21, with an expected decline in their operating profit margin (OPM) by 300-500 bps.
According to the agency, fashion retailers will witness a material weakening in their credit profile in FY2021, though some of the retailers have strong liquidity and/or financial support from a strong parentage. F&G retailers are expected to report 3-7 per cent revenue growth in FY2021, with increased proportion of food and staple products (vis-a-vis general merchandise) in their revenue mix, it said.
This would weaken their gross margins on a Y-o-Y basis. However, it is expected to weaken their credit metrics. To conserve cash and optimize working capital, most of these retailers have restricted fresh inventory purchase during April to October as they are looking to carry forward their spring-summer inventory till the autumn season.