Apparel retailers to grow 7-8% this fiscal: Crisil

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₹1.9 lakh crore revenue last fiscal for the industry. Meanwhile, moderating input prices will help offset impact of higher marketing spends keeping margins stable, it said. Last fiscal, retailers had registered a 38% growth on a low base, driven by pent-up demand post the pandemic slump and higher realizations following a steep increase in raw material prices, which was passed on to shoppers.

“Demand from the premium segment is rising gradually with consumers increasingly preferring branded garments, driven by return to office and buoyant corporate activity. This is helping offset muted-to-low demand from the economy and value segments (60% of total revenues) because of changes in discretionary purchasing decisions, including due to rise in food inflation, in the recent past. With continuous store expansion, and the onset of the festive and wedding season, demand should improve materially in the third quarter (~35% of annual revenues) and a part of the fourth quarter, supporting revenue growth," said Anuj Sethi, senior director, Crisil Ratings.

Meanwhile, the report said the pace of store area addition will normalise to the pre-pandemic level of 2.2 million square feet in fiscal 2024, compared to 3.7 million square feet last fiscal. Additionally, operating margins are expected to be rangebound at 8% this fiscal, as improving product mix in favour of the premium segment and lower input costs offset the impact of higher marketing spends, the report said. “Operating margin is seen at previous year’s level of 8% despite significant reduction in prices of key raw material i.e.