Apparel retailers stare at a weak June quarter amid curbs
PremiumApparel retailers are grappling with subdued sales in the June quarter as restrictions on markets and a muted consumer sentiment dented demand
Apparel retailers are grappling with subdued sales in the June quarter as restrictions on markets and a muted consumer sentiment dented demand.
Apparel sales fell 47% in April from the same month in 2019, Retailers’ Association of India or RAI said in a report on the retail sector last month. Sales in April 2020 were also a washout because of the covid lockdown. In all, retail sales were down 49% across India.
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“Last year, consumer sentiment was down, but this year we have seen a lot of causalities because of which consumer sentiment might take longer to return. The first quarter has not played out as we expected," said Akhil Jain, executive director of apparel retailer Madame.
E-commerce sales are not that great either, he said, as consumer sentiment is very different this time around. Consumers are likely to focus on essential items.
Madame expects sales to drop 29% in the June quarter from the same period in 2019.
The retailer reported sales growth in Punjab and Haryana, which accounted for more than 30% of its business in April. However, subsequent restrictions in the two states have impacted business and store operations, Jain said. He expects demand to pick up by the end of the third quarter.
Several manufacturers of readymade garments are also expected to report a significant drop in orders, especially from domestic retailers.
A report by ratings firm Crisil released on Thursday estimated that the second covid wave is set to impact the readymade garments sector, which will now grow between 15% and 20% this fiscal, slower than the 28-33% pace expected earlier. This growth will also come on the back of a low base of the last fiscal.
“The first quarter of this fiscal will be a near-washout, with most domestic brick-and-mortar stores shut and sales through e-commerce channels curbed. The second wave has also hit the hinterland, affecting sales of ‘value’ or affordable garments, which is the fastest-growing segment. Thankfully, with vaccinations accelerating and the caseload dropping, a gradual recovery is likely from the second quarter. Consequently, we see domestic sales growing 14-18% this fiscal compared with a 24% contraction last fiscal," Hetal Gandhi, director at Crisil Research, said in the note.
Domestic demand, which accounts for 74% of overall demand for garment makers, had started recovering in the second half of last fiscal after lockdowns and other restrictions were lifted, Crisil said.
However, since the fierce second wave landed in the first quarter of this fiscal, curbs have been reimposed, slowing demand recovery, it added.
As the second wave hit, several states imposed lockdowns in April and May. Most states directed non-essential stores and malls to shut down.
States such as Maharashtra and Haryana have moved to ease some lockdown restrictions, but retailers are unsure whether shoppers will be eager to return.
“First quarter will be a drag for apparel retailers. Revenue is down to nothing. Even if stores are opening, say in states like Maharashtra, consumers are unlikely to walk in," said Abhishek Sharma, director, retail, at Knight Frank, a realty consulting firm.
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