Indian apparel retail revenue to dip 35% in FY21: CRISIL

29 Jun '20

2 min read

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Revenue of the ₹1.7-lakh-crore organised apparel retail sector in India is set to plummet by 30-35 per cent this fiscal due to temporary store closures, restricted mobility and low income visibility for consumers, according to rating and analytics firm CRISIL, which recently said the absolute fall in operating profits will be much sharper, necessitating additional funding, mainly debt, by firms to make up for cash flow shortfalls.

This will affect credit metrics.

Pent up demand, as well as the behaviour of consumers post lifting of lockdown, will have a bearing on the pace of recovery, the company said in a statement.

Among the apparel segments, sales of the departmental store format will be hit harder, with nearly 40 per cent decline in revenue, as half of these departmental stores are mainly located in malls and tier 1 cities.

For value fashion retailers, the impact will be lower at around 30 per cent, as these have higher presence in tier 2 and 3 cities, with over half of the stores located in these geographies. A higher proportion of standalone stores and expected benefit from down-trading with income levels decline will also benefit this segment.

Apparel retailers are also likely to see higher contribution from online channels this fiscal, driven by changing buying pattern of consumers amid the pandemic.

With cash flows being crunched, retailers are seen availing additional debt to make up for the near term shortfall in cash accruals vis-à-vis fixed obligations.

Apparel retailers with omni-channel presence, balanced mix of brands and private labels and sufficient liquidity, and those with access to support from strong parents or groups, will be placed better to counter the challenging business environment, CRISIL added.

Fibre2Fashion News Desk (DS)

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