In its recent outlook for apparel retail, India Ratings and Research (Ind-Ra), said India’s organized apparel market is geared for a better business outlook in FY22 as improved consumer confidence, pickup in store expansion and prospects of wider vaccine rollout help the sector rebound.
As per the Ind-Ra report, the apparel segment has been improving with sales recovering to almost 80 per cent of pre-COVID levels during the 3QFY21. Though these retailers are expected to close the current fiscal with a 40-45 per cent dip in business, hey are set to reach FY20 recovery levels in FY22
The ratings agency remains bullish on improved cost structures, liquidity enhancement measures and omni-channel push by key retailers. Interestingly, analysts at Ind-Ra expect cost rationalization measures undertaken by retailers during last year’s crisis to sustain even after business returns to normal in FY22. This will help structurally improve the margin profile of apparel retailers, said Prasad Patil, Analyst
The lockdown and the subsequent shift in consumer habits prompted apparel retailers to slash their inventory forecast, up their presence online and switch to more comfort wear as demand for formal and occasion wear remained muted. While apparel retailers struggled, for food and grocery and electronics retailers, business has fared much better.
After store expansion capex was reduced sharply in the first half of the current fiscal, Ind-Ra expects the pace of expansion for clothing retailers to accelerate in FY22. They will continue to develop their omni-channel capabilities to widen their digital and customer interaction capabilities and thus complement the brick-and-mortar business.