Second COVID wave to delay fashion retail recovery to 2023: ICRA

Domestic ratings agency ICRA expects the second wave of coronavirus infections to delay the retailers’ recovery to FY23. The agency expects revenues in the industry to grow by 23-25 per cent on a low base in 2021-22 which would not be sufficient to get the business performance back to the pre-COVID-19 levels

Sakshi Suneja, Sector Head said, retailers are expected to continue with cost cutting measures in FY22 supporting their operating profit margins (OPM) at around 4.1 per cent in FY22, though these may remain lower by around 2.50 per cent from FY20 levels.. De-leveraging of balance sheets will improve credit profiles of retailers in 2021-22 as compared to the year-ago period. However, these will remain weaker than the pre-COVID-19 levels, Suneja added.

ICRA expects retailers to invest Rs 2,400 crore in capital expenditure in 2021-22, largely on store expansions that got deferred as a result of the pandemic. The pandemic has also spurred the adoption of online retailing in India, with most of the retailers reporting more than 50 per cent jump in online sales in the first nine months of the fiscal albeit on a low base, leading to increased proportion of online sales within the overall mix, said Priyesh Ruparelia, Co-Group Head.