Fashion retailers frayed by Covid see sales pick up, ICRA says
After the second pandemic wave, the fashion retail segment began to witness recovery trends, according to a report by ICRA. However, he added that the segment is only expected to reach pre-Covid sales levels by the second quarter of fiscal 23.
During the months of July and August, the fashion retail segment recorded sales as high as 70-85% of pre-Covid levels. Although average ticket sizes have “moderated from FY21 levels,” attendance has increased, the report adds.
Sakshi Suneja, Deputy Vice President and Sector Head of ICRA, said, “With improved immunization coverage, the segment is expected to experience annual growth of 15-17% during the period July-March 2022, resulting in annual growth. 23-25% revenue growth in FY22. However, this will remain up to 20% lower than the pre-Covid sales level. ICRA therefore maintains its negative outlook for the segment and expects it to return to its pre-Covid sales level by the second quarter of fiscal 2023. “
The report noted that the scope of leasehold concessions in the first quarter of FY22 is significantly lower by up to 55% than in the first wave. Most retailers also reversed wage cuts in FY22, although they are expected to continue to rationalize other overheads.
As the pandemic has accelerated online shopping, the report notes that fashion retailers will continue to focus on expanding offline retailing, as the online channel will only complement and not replace the offline model. expansion line of stores.
“Fashion retail entities in the rating agency sample are expected to increase their capital spending for adding stores by more than 45% in FY 22, which implies a full down payment.” of about 14 billion yen. The liquidity position of most of these retailers also remains solid due to the capital increases carried out in fiscal year 21, ”the report notes.
A severe third wave, however, poses significant downside risks. “The third wave could potentially reduce segment revenue by up to 40% from the CIFAR baseline in the third quarter of fiscal 22, resulting in modest year-on-year revenue growth of 7 at 8% only in fiscal 22, “Suneja added.