Large apparel retailers resume expansion plans: Report
Premium- Most of the well-capitalized large retailers have resumed their aggressive plans to add nearly 15–20% to the store footprint, compensating for the slow store additions in the recent past
New Delhi: Large, organized apparel retailers such as Trent, Aditya Birla Fashion and Retail Ltd (ABFRL), and V-Mart are adding more stores in the country, compensating for the slow store additions in the recent past, according to a report by brokerage Motilal Oswal.
Analysts at the brokerage made channel checks with both listed and unlisted apparel retailers.
Most of the well-capitalized large retailers have resumed their aggressive plans to add nearly 15–20% to the store footprint, compensating for the slow store additions in the recent past, they said in a note on the sector.
A steady chunk of stores is currently under construction, which may keep the pace of store additions healthy for most players.
"Our channel check suggests Trent has a healthy pipeline of 75–80 Zudio store adds and 35–40 Westside store adds in FY22 (20-25 stores of Westside or Zudio added in the first half of FY22). ABFRL, V-Mart, and Shoppers Stop are expected to have 15–20% store footprint additions annually," the report said.
The report also indicated a steady performance for apparel retailers in the third quarter of the ongoing financial year—but said that demand in December was “sluggish". This was on account of fewer festive and wedding-linked shopping occasions, consumption fatigue after the period of pent-up demand, as well as consumers and local authorities getting sensitized to the rise in covid-19 cases.
Urban markets outperformed rural markets with tier 2 and 3 markets barely reaching pre-covid like-to-like performance levels, the report said.
Interestingly, exclusive brand outlets (EBOs) reported better recovery versus multi-brand outlets in the distribution channel.
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“This could be due to a lacklustre performance in tier 2 and 3 cities, which remains the key market for MBOs, weak liquidity of smaller channel partners, and the increased penetration of online players in tier 2 and tier 3 cities," it said.
Higher input costs are also promoting apparel retailer to consider price hikes. The brokerage said apparel retailers took a 7–8% price hikes over the last few quarters.
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