The garment retail sector in India is experiencing a slowdown in demand, with apparel retailers reporting a decline in revenue and profits.
Lower sales and high inventories have been attributed to factors such as weak discretionary demand, inflationary pressure, and interest rate hikes. However, premium and luxury fashion brands have seen strong growth, driven by affluent consumers.
“Agility and tech-driven strategies are also seen as key for success, particularly in targeting GenZ consumers,” HT reported.
Multi-brand apparel, beauty and accessories retail chain Shoppers Stop reported a fall in quarterly profits on account of weakness in discretionary demand that hampered revenue growth.
Arvind Ltd which too sells licenced international brands like Tommy Hilfiger reported a sales decline in the third quarter. Its denim category under Flying Machine, US Polo Association and Arrow also underperformed.
“Although our sales value improved because of price restructuring, we have sold fewer units in the last quarter. “So, the quantity sold is less because we are serving fewer customers,” Akhil Jain, ED at women’s clothing brand Madame said.
“Most apparel companies overestimated demand based on revenge shopping trends they witnessed in 2022. “They thought the momentum would continue and planned it big for the summer and winter of 2023. But consumption slackened leaving many with huge inventories,” Jain said.
Hit hard by food inflation in the last couple of years, middle-class and low-income group consumers have been scrimping on discretionary purchases such as fashion.
“On top of that, interest rate hikes have impacted people with auto and home loans. Besides, the news of layoffs at tech companies does not instil confidence,” said Rajat Wahi, Partner, Consulting at Deloitte India.
Anuj Sethi, Senior Director, CRISIL Ratings agreed that continuing inflationary pressure, slow growth in rural incomes, and tepid salary raises in sectors such as IT, have dented demand for apparel.
“Impact is highest on the economy and value apparel segments, which account for 60 percent of total revenues, leading to continuing deep discounts and advancing End of Season Sales,” Sethi said.
However, premium and luxury fashion brands have seen strong growth in the festive months.
“Obviously, India is seeing a K-shaped recovery where the affluent are driving demand for the premium segment,” Wahi said.
Madame’s Jain agreed that premium, bridge-to-luxury, and luxury brands have seen robust sales as customers are evolving.
“Consumers are seeking experiences which come with premiumization. Even though we are a mid-segment brand, we have entered the premium fragrance category with perfumes made in France and priced at Rs 4,000 to Rs 6,000,” Jain stated.
Another reason for mounting inventory is the clutter in the segment, not in terms of newer brands coming in, but in existing brands increasing their footprint.
“Everyone is trying to gain as many square feet of space as possible, across formats, be it shop-in-shops, multi-brand retail or exclusive brand stores,” Jain added.
In the next fiscal, CRISIL’s Sethi expects demand revival to be gradual, and contingent on higher sales in the economy and value apparel segments.
Jain said companies should be satisfied with 10-11% percent growth for the next two years given that some of them saw negative growth.
Image Credit: Businesswire
