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21-23 Per Cent Revenue Growth Predicted For Apparel Retailers: Research Predicts

Contributions from strong same-store sales, new store openings, and online channels are expected to drive apparel retailer sales growth of 21-23% this fiscal year.

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Contributions from strong same-store sales, new store openings, and online channels are expected to drive apparel retailer sales growth of 21-23% this fiscal year, an increase of 500 basis points (bps) from pre-pandemic levels, says Crisil research.  


The operating margin is expected to improve 175 to 200 basis points YoY to 7.75 to 8 percent. This is underpinned by improved fixed cost absorption, higher prices, and increased scale leading to increased private label share. However, higher input prices will limit operating margins to 50 to 70 basis points above pre-pandemic levels, as per the study. The domestic cotton prices also have been observed to have risen in April 2020.


The apparel retailer's balance sheets have been well managed through timely equity raising during the pandemic, which helped to mitigate the impact of volatility on sales and profitability. With increased sales and profitability and increased cash flow from operations, apparel retailers are ready to invest in increasing their presence in stores and online.


It is predicted that the large apparel retailers will see a 25-30% growth this fiscal year. That puts it on a relatively low base, mainly because large-scale ones in malls and boulevards have been hit harder by pandemic-related lockdowns. This is driven by an increase in sales and the high contribution of new stores that have been launched in the last two to three fiscal years. These have made sub-optimal contributions during the pandemic.


The apparel retailers' capital spending this year is expected to increase by more than 30% year-on-year due to improved demand. A significant portion of spending is on expanding technology platforms and online services, apart from store expansions, storage space additions, and brand acquisitions investments. Online channels are expected to account for more than 15% of total apparel retail sales this year, up from 5% in 2020.


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