FY21 Indian apparel retail revenues to fall 40-45%: Ind-Ra

December 03, 2020 - India

With apparel retailers closing fiscal 2020-21 with a 40-45 per cent decline in revenues, while food and grocery retailers are likely to report a 5-10 per cent dip, India Ratings and Research (Ind-Ra) maintained its sombre outlook on the retail sector, estimating a demand recovery for the sector in the second half of the year and well into 2021-22.

The agency also estimates a threefold jump in online sales for retailers in this fiscal.

India’s lockdown affected several retailers, but those in the apparel business saw a severe slump in demand as stay-at-home consumers felt little need for formal and occasion wear.

Lockdown and, later, restrictions on store operations crushed summer season sales. It is only now that the clothing segment is clawing back on the back of festive and wedding season sales.

An Ind-Ra note signalled a more promising third quarter for retailers as mobility normalized and pent-up demand led to increased consumption for some categories, even as it flagged concerns around social distancing norms and a slowing economy.

For the third quarter, Ind-Ra, a part of the Fitch Group, expects apparel sales to touch 80 per cent of pre-COVID levels, it said in a press release.

The note, meanwhile, predicts an obvious significant shift in consumer shopping habits with more consumers buying goods online. Ind-Ra expects sales made through the online route to increase by a factor of more than three in 2020-21.

As a result, business via own websites or through online marketplaces is expected to increase to 10-15 per cent of total sales by 2021-22, up from 2-4 per cent, faster than the earlier five-year timeline predicted to reach this volume, it said.

However, Ind-Ra hasn’t predicted the demise of offline retailers just yet. Despite footfall in malls still not increasing sufficiently, the ratings agency is bullish on retailers expanding beyond metros. However, store sizes could be rationalized, it added.