24 June 2023, Mumbai
Fashion retailers anticipate 10% revenue growth in the current fiscal year, impacted by inflationary challenges.
Growth and Margin Decline
ICRA's analysis of 11 listed retail entities reveals a projected 100 basis points decline in operating profit margins (OPMs) to around 5.7% due to weaker demand and sustained high advertising and promotion expenditures.
Expected Demand Revival
The value fashion segment experienced a consecutive quarter-on-quarter decrease since Q3 FY2023, while the premium segment displayed demand slowdown signs in Q4 FY2023, with sales per square foot below pre-pandemic levels. Retailers expect demand pressures until H1 FY2024, improving during the festive season.
Cautious Optimism
Despite robust growth driven by network expansion, OPMs remained 100 basis points below pre-pandemic levels. Retailers remain hopeful for demand recovery in H2 FY2024 and plan to increase discounting levels. Store expansion continues, with capex outlay projected to rise by 10% to Rs 1,600 crore in FY2024.
