Icra forecasts 15% revenue increase for fashion retailers in FY25

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.