Led by festival season, the revenue of apparel retailers will grow by 7-8% in FY24

According to the rating agency CRISIL, brick-and-mortar apparel retailers' sales are expected to increase by 7-8% this year, mostly as a result of the festive and wedding season.

However, it is anticipated that the revenue density would stay below the pre-pandemic level when expressed as revenue per square foot.

According to a CRISIL publication based on the examination of 39 retailers, store expansion, including in tier 2 and 3 cities, will support the sector's growth in the medium term. In FY24, the pace of store area addition will return to the 2.2 million square feet pre-pandemic level. This was 3.7 million square feet in FY23.

Retailers are also expanding to Tier 2/3 cities, which will be relatively smaller-sized outlets, but store expansion in metros and Tier I cities will continue. Therefore, this year, the rate of area addition will return to pre-pandemic levels, according to CRISIL.

Because of an improved product mix that favours the premium segment and lower input costs, these retailers' operating margins are predicted to be approximately 8% in FY24, offsetting the effects of greater marketing expenditures.

According to Mr. Anuj Sethi, Senior Director at CRISIL Ratings, "Demand from the premium segment is rising gradually with consumers increasingly preferring branded garments, driven by a return to the office and buoyant corporate activity.”

Furthermore, CRISIL added that as customers mix online and physical shopping, the proportion of online sales in total income, which doubled to 8% last year from pre-pandemic levels, is anticipated to stabilise.

According to CRISIL, investments in technology platforms and retail expansion will keep the cap on industry capital expenditures at the same level of Rs. 2,000 crore (US$ 240 million) as last year.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.