India’s luxury retail to grow by15-20% in 2025: McKinsey & Co

01 March 2025, Mumbai

Surpassing the growth rates in the US, Europe and China, India's luxury retail sector is projected to grow in the range of 15-20 per cent Y-o-Y in 2025, as per McKinsey's 2025 Fashion Growth Forecasts report. Within the competitive Indian apparel market, Uniqlo has demonstrated remarkable growth, outperforming established players like Zara and H&M.

Financial results for FY24 show, H&M India led in revenue with Rs 3,278 crore, marking an 11.4 per cent growth, fueled by its 64 stores. Zara secured Rs 2,769 crore, an 8.4 per cent increase, operating with 21 stores. A relative newcomer since 2019, Uniqlo reported Rs 815 crore, boasting a 31 per cent rise, with 15 stores.

Expense structures varied significantly with Zara’s procurement costs accounting for 70 per cent of total expenses, versus 42.2 per cent for H&M and 55.2 per cent for Uniqlo. Employee benefits showed H&M at Rs 150 crore, Zara at Rs 81 crore, and Uniqlo at Rs 82 crore. Profitability also differed, with Zara achieving Rs 244 crore, Uniqlo Rs 85 crore, and H&M Rs 7 crore. Notably, Zara’s support fees and royalties were Rs 190 crore, H&M’s Rs 865 crore, and Uniqlo’s Rs 27 crore.

Uniqlo stood out with average revenues per store of Rs 131.9 crore, compared to Zara’s Rs 54.3 crore and H&M’s Rs 51.2 crore. This reflects Uniqlo's premium positioning and efficiency.

While Zara and Uniqlo demonstrate strong brand loyalty and profitability, H&M faces challenges. Its lower margins and competitive pressures from domestic brands like Zudio suggest a need for strategic realignment. The FY25 outlook indicates Zara and Uniqlo are positioned to further widen their margin gap with H&M, unless the latter implements a robust growth strategy and differentiation.

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