Fashion retailers are projected to achieve revenue growth of up to 15 per cent in FY25, driven by network expansion, according to Icra. Despite facing inflationary pressures, the sector maintains a stable outlook, with operating profit margins expected to range between 13-14 per cent.
Icra reports that the anticipated revenue growth is bolstered by the festive season and new store openings. The ratings agency also notes a potential for marginal sales growth in Q2 FY25, especially as the festive season transitions into Q3.
After experiencing a slowdown in demand since Q4 FY23, fashion retailers in Icra's sample set reported an 18 per cent year-on-year sales growth in Q1 FY25, primarily due to expanding store networks and new product launches. However, the premium segment faced a 3 per cent contraction in average sales per square foot during the June quarter, while value fashion segments have recovered to pre-pandemic levels.
Despite flat margins year-on-year, attributed to rising advertising and promotional expenses, retailers have minimized discount levels since Q2 FY24 to protect gross margins. Sakshi Suneja, Vice President & Sector Head at Icra, highlighted that retailers are increasing spending on advertisements and promotions, particularly with the festive season approaching.
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