CRISIL Ratings: Revenues of apparel retailers to grow by 21-23% in 2023

CRISIL Ratings: Revenues of apparel retailers to grow by 21-23% in 2023

13 August 2022, Mumbai:

What is apparel retail industry

Revenues of apparel retailers are expected to grow by 21-23 per cent in 2023 on account of strong same-store sales, new store launches, and higher contribution from online channel, despite elevated inflation impacting discretionary demand.

ALSO READ Retailers optimistic as apparel sales clock growth in March


RELEVANT NEWS Rising cotton cost compel Indian fashion retailers to hike apparel prices

As per a study by CRISIL, the operating margins of retailers is expected to mprove 175-200 bps on-year to 7.75-8 per cent, supported by increase in scale leading to better fixed-cost absorption, price hikes, and greater share of private labels.

However, higher input prices will cap the operating margin 50-70 bps below the pre-pandemic level. Among the key inputs, domestic prices of cotton almost doubled between April 2020 and May 2022. Despite some moderation since June 2022, they are expected to remain higher that what it was before the pandemic.

Clothing retailers and brands

Balance sheets of apparel retailers were managed well during the pandemic through timely equity raising, which helped mitigate the impact of volatility in revenue and profitability. Now, given improving revenue and profitability, and therefore higher cash from operations, apparel retailers are well placed to invest in increasing stores and online presence, which will gradually benefit their credit profiles.

Garment and Retailers

CRISIL Ratings expects large apparel retailers to grow faster at 25-30 percent this fiscal, compared with 10-15 percent by their small and mid-sized counterparts. This would be on a relatively lower base as the large ones, being predominantly situated in malls and high streets, were impacted more by the pandemic-related lockdowns.

They will also lead the improvement in operating margins with ~250-300 bps expansion this fiscal. Because of higher fixed costs, their operating margins were more negatively impacted during the pandemic.

That situation will now reverse. Moreover, they typically have stronger and well-established brands that command higher gross margins compared with mid-sized apparel retailers.

Join our community on Linkedin

Author’s Posts

  • Reliance Retail Expands Yousta Footprint with Two New Stores

    PM-Vishwakarma Yojna: Boosting the Apparel Industry and Empowering Artisans

    23 September 2023, Mumbai

    A Tailor-Made Initiative with...

    Sep 23, 2023

  • Levi's® Launches "For Now, For A Lifetime" Campaign Celebrating Moments of Instinct

    Arrow appoints Anand Aiyer as CEO

    23 September 2023, Mumbai

    In a recent press release, Ar...

    Sep 23, 2023

  • Fashion Retailers to Face Profit Margin Pressure in FY2024, Despite Revenue Growth: ICRA

    Inside Fashion Vol. 23 No. 2
    Virtual Fashion