Sense of buoyancy & optimism in apparel retail – CMAI

26 Aug '14

3 min read

There is a sense of buoyancy and optimism in the apparel retail segment, reveals the latest Apparel Index released by the Clothing Manufacturers Association of India (CMAI) for the April-June quarter.

CMAI’s Index assesses the performance of domestic apparel industry every quarter, comparing it with the same quarter in the previous year.

A CMAI press release reports that a positive reaction has come after a long lull. There is optimism among apparel retailers and brands compared to the same quarter last year, when they were bogged down by low consumer sentiment, high raw material costs and other negative factors.

The statement informs that the last years quarter of April-June 2013, was by itself good because the excise duty on branded clothes had just been removed and the mood in the industry was buoyant.

While in the April-June 2014 quarter, consumer sentiment remained subdued due to elections. However, CMAI says there was a sense of optimism in the just completed quarter as most respondents have reported growth and control over inventory.

It adds that less than 4 percent reported negative performance in parameters like; sales, sales turnover, sell through and investments.

Among all the four parameters assessed to arrive at the index, the highest growth in value terms has been in sales turnover at 5.97 points, followed by a moderate growth in investments at 2.40 points, sell through was at 2.03 points and a significant control in restricting inventory holding duration increased by just 1.25 points, resulting in a healthy growth in index value.

Most respondents pointed out that positive sales turnover growth was due to factors like a rise in consumer spending, end of season sales and an effective response to fresh arrivals displayed along with discounted merchandise.

Almost 46 percent respondents said their growth was between 1-20 percent, another 25 percent reported growth between 21 to 40 percent; and nearly 12 percent revealed robust 41 percent growth. For 17 percent respondents, sales turnover either remained flat or decreased marginally.

Sell Through too indicated a positive move with almost 96 per cent respondents showcasing improvement, while only 4 per cent indicated a downward trend. Sell Through is an indication of the percentage of goods sold at fresh prices, without any discounts.

Thus it has a direct impact on profitability. Hence, it proves that the quarter generated more profits than the same quarter of previous year for most respondents, CMAI avers.

Inventory holding figures reveal that the performance of brands is improving but there is still way to go in terms of reducing inventories to turn profitable. Nearly 24 percent of respondents said the duration of inventory holding had declined during the quarter.

However, 55 percent said it has increased compared to the previous quarter. An increase in inventory holding can create a negative impact on profitability because of a rise in interest cost for holding the inventory.

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