Due to temporary shop closures, reduced mobility, and a general drop in discretionary spending in the June quarter, clothing retailers are projected to post a 15-20 percent revenue rise this fiscal year, down from a previous forecast of 35 percent, according to rating agency Crisil.
The increase is on a far lower foundation than in 2020, when clothing retailers saw a 35 percent drop in sales growth.
Demand for organised clothing is expected to rise up in the second quarter of this fiscal year, according to the ratings agency, although it will be reliant on the second wave’s slowdown as well as the vaccination campaign.
“Reopening from June is likely to ignite a gradual recovery,” it said in a note released Wednesday.
Meanwhile, it expects the share of online sales to touch 8-9% of total sales of apparel retailers this fiscal compared to 4-5% reported by companies pre-pandemic.
Revenues will reach 70-75 percent of pre-pandemic levels this fiscal year, which ends in March 2022, according to the ratings company. Several states went into lockdowns in April and May to contain the second, more severe wave of covid-19, which hurt clothing sales in the June quarter.
The business looked at 60 Crisil-rated clothing stores, which make about a third of the industry’s sales. Operating margins at clothes retailers will rise at a modest rate of 4-5 percent this year due to a slow topline rebound. This is lower than Crisil’s prior projection of an operating margin increase of 7-8 percent.
Meanwhile, clothing retailers rated by Crisil would be better off as a result of a Rs2,000 crore equity raising last fiscal year. Others may “resort to extra debt to bridge near-term cash-flow imbalances, which may have an impact on their credit quality,” according to the report.
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