NEW DELHI: Footwear companies could see sales touching pre-pandemic levels by next fiscal, as consumer mobility and discretionary spending improve, CRISIL said in a report on Tuesday.
"With mobility and discretionary spending improving, the footwear sector could see revenue growth striding ahead by 23-25% ahead next fiscal, closing in on pre-pandemic topline levels of ₹70,000 crore."
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In the current fiscal, the category will see a 21% contraction in sales as the pandemic led-lockdown, and a shift to work from home hit demand in the first half.
Domestic demand will decline around 19% this fiscal, CRISIL said.
India is the second-largest producer and consumer of footwear in the world, according to data available on the Invest India site.
Domestic demand, which accounts for 75% of the sector’s revenue, rebounded third quarter onwards with the easing of lockdown curbs and helped by festive spending, CRISIL said in its note.
In fact, revenues returned to over 90% of pre-pandemic levels for footwear manufacturing companies in Q3. They are expected to recover almost fully in the current quarter.
“Calibrated re-opening of offices and schools, and resumption of social gatherings will support footwear demand next fiscal. Also, Covid-19 vaccination across the countries will spur mobility of people and result in demand growth. However, the operating profitability of footwear companies is expected to contract by 150-175 basis points due to higher raw material cost," said Nitin Kansal, Director, Crisil Ratings.
The commentary on the sector is key as it ties into household consumption and helps gauge consumer mobility and demand. Moreover, retail as a sector saw uneven demand this fiscal as retailers of electronics reported strong demand while those selling apparel had a testing year.
The report, however, flagged sluggish exports as a concern as major export markets such as the US and Europe see fresh lockdowns.
“India’s footwear exports contracted a sharp 30% in the first nine months and would end up the fiscal with 25% de-growth," it said.
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