Fuelled by the festive season, branded apparel makers reported a steady increase in profit margins in the December quarter. As per Wazir Advisors, Aditya Birla Fashion & Lifestyle reported a 2.2 per cent increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) margins for the quarter ended December 2018 as against 1.2 per cent posted in the previous year.
Similarly, Gokaldas Export and Page Industries reported 4.3 per cent and 21.5 per cent of EBITDA margins for the quarter ended December 2018 versus 2.2 per cent and 20 per cent in the September quarter of 2018.
Improved sales, no discounts makes for favorable quarter
Many wholesalers build their stocks during the December quarter as it improves sales. Also, as Rahul Mehta, President, CMAI, notes, retailers do not have to offer discounts to buyers in December since it is peak demand season. Discounting of branded apparels has become a common phenomenon after e-commerce players started offering discounts throughout the year. However, consumers have realised the real value of apparels and started buying from exclusive branded stores.
Aiming for a faster growth
Kewal Kiran Clothings, owner of denim brands like Killer, Lawman pg3, Integriti, K-Lounge and Additions currently has a high return on capital employed (ROCE) of more than 60 per cent. However, the company aims to grow much faster than the compounded annual growth rate (CAGR) growth it has delivered in the last 10 years. The company has outlined a plan to invest Rs 150 crore in the next two years in expanding capacities, in both denim and branded shirts and T-shirts. The company also plans to open 36-40 stores every year besides increasing the number of distributors. Some foreign brands in the country have grown fast at the expense of profitability whereas leading domestic brand Killer believes in sustainability before scalability. Advantages of EBOs in branded apparels
Branded apparel in India is sold through three major channels - well-established distribution networks, company owned or franchisee stores and large format stores. Both domestic and international brands have a presence across all channels. Online selling or e-commerce is a recent phenomenon.
Large format stores sometimes do not stock a huge inventory making the choice available at such stores limited. Exclusive brand outlets (EBOs), on the other hand, are always well stocked and offer a wider choice. Marked by a huge spending on advertisement and marketing, the segment in India is likely to continue growing at a steady pace.