Organised apparel retailers to clock 8-20% revenue growth in FY25: Report

The organized retail apparel sector is projected to achieve revenue growth of 8-10% in the current financial year, driven by rising demand from a normal monsoon, easing inflation, and the festive and wedding seasons. According to a report by Crisil Ratings, the increasing preference for affordable, trendy fashion clothing that mimics high-fashion designs is expected to be the primary revenue driver this fiscal year. Notably, the mass market segment now accounts for 60% of total sales, up from 56% before the pandemic.

Crisil Ratings Senior Director Mr. Anuj Sethi highlighted that while the sector's growth will be slower than the 11-12% compound annual growth rate observed between fiscal years 2018 and 2023, retailers prioritize operational efficiencies over new store openings. Retailers are expected to maintain operating margins between 7.2-7.4%, despite high marketing expenses, by controlling costs and limiting reliance on external debt. The report indicates that fast fashion is increasingly influential while the mass market remains the largest segment in apparel retail. As consumer spending shifts towards travel and luxury goods in major urban areas, retailers are expected to expand cautiously, focusing instead on tier II and III cities transitioning towards organized retail. The projected area addition will decline YoY to 2.2 million square feet, down from 3.6 million square feet last fiscal year. Due to muted same-store sales growth, Revenue density is expected to remain flat at US$ 142.37 (Rs. 11,900) per square foot. Overall, improvements in profitability will be driven by better inventory management and stable input costs, while the ability to navigate changes in commodity prices, inflation, and consumer behaviour will be critical to sustaining momentum in the fast fashion segment.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.