Second wave to impact fashion retailers, revenue to hit pre-covid levels only in FY23: Report

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The second wave of coronavirus infections reported from various pockets of the country has come as a “strong headwind” to fashion retailers. As per the domestic rating agency ICRA, it is expected to delay the recovery back to pre-covid levels till FY23.

The industry is set to show a revenue growth of 23-25 per cent on a low base in 2021-22, but that will not be sufficient to get the business performance back to the pre-covid levels, said in the ICRA report. The report also mentioned that the industry was recovering well till the second wave hit. It sales had touched over 70 per cent of pre-covid levels by the December quarter of 2020.

The sector head at ICRA, Sakshi Suneja said industry players adopted to several cost-saving measures by fashion retailers, including rental negotiations, salary and overheads rationalisation in FY21 to protect the businesses. They are expected to continue the same in FY22 also, pending a revival in discretionary demand.

“This is expected to support the operating profit margins (OPM) at around 4.1 per cent in FY22, though these will remain lower by around 2.50 per cent from FY20 levels,” she said.

Its co-group Head, Priyesh Ruparelia said,”Expectations of increasing and widespread availability of vaccines in the coming months will drive recovery of the sector’s revenues and profitability to pre-covid levels in FY23.”

The agency also said that the fashion retailers industry is set to invest Rs 2,400 crore in capital expenditure in 2021-22, largely on store expansions that got deferred as a result of the pandemic, and added that attractive rentals are a pull.

The pandemic has also spurred the adoption of online retailing in India, with most of the retailers reporting more than 50 per cent jump in online sales in the first nine months of the fiscal albeit on a low base, leading to increased proportion of online sales within the overall mix, Ruparelia said.