CMAI's Apparel Index
A comprehensive report on the Apparel Index for the July to September Quarter by CMAI
CMAI’s Apparel Index, this Quarter (July- Sept Q2 FY 2014-15), clearly sets apart the performance of two sets of brands. First, the ‘Big Brands,’ i.e. those with a turnover of R25 crores and above and secondly, the ‘Smaller Brands,’ i.e. those with a turnover between R10 - R25 crores. While the former scored an impressive growth of 9.98 points, Small Brands touched a meagre 4.24 points. In fact, Small Brands’ low growth impacted the overall Index Value, which recorded an average 7.96 points growth. The Index Value of Large Brands was highest with 11.65 points amongst the Four Groups of Brands. High Inventories emerged as the biggest barrier to growth, despite positive consumer sentiment. Players’ inability to manage and control Inventories to make way for fresh merchandise, heavily impacted the Sales Turnover and Profit Margins.
CMAI’s Apparel Index aims to set a benchmark for the entire Domestic Apparel Industry and helps Brands in taking informed business decisions. The Index is analysed on the basis of Four Parameters; Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in Brand Development and Brand building. This time, 105 Brands shared their responses on the Four Parameters.
Of these, nine were ‘Giant Brands’ (Turnover above R300 Crores), 30 Large Brands (Turnover R100 - R300 Crores), 29 Mid Brands (Turnover R25 - R100 Crores) and 37 Small Brands (Turnover
R10 - R25 Crores).
CMAI’S APPAREL INDEX AIMS TO SET A BENCHMARK FOR THE ENTIRE DOMESTIC APPAREL INDUSTRY AND HELPS BRANDS IN TAKING INFORMED BUSINESS DECISIONS.
POOR INVENTORY CONTROL AFFECTS PROFITS
Small Brands’ slow growth has impacted the overall Index Value but what worked for Big Brands was good growth in Sales Turnover and a restricted increase in Inventory Holding. Small brands recorded average growth in Sales Turnover because of an increase in Inventory Holding. However, most players have reported growth in the second quarter of fiscal 2014-15 compared to the same quarter, last year. Many have indicated an overall ‘Reasonable Growth Quarter,’ with few signaling negative performance during the quarter under review.
Most retailers plan their inventories well in advance, keeping the demand for a particular product, style and pricing in mind. Old inventory is regulated so that they can quickly make way for fresh merchandise on the racks for the new season. However, the index does reflect that only a few managed their inventories well. Almost 70 per cent respondents said that their Inventory Holding increased, impacting profitability.
PLAYERS REALISE THE NEED TO INVEST
The Apparel Index showcased a tremendous improvement in Fresh Investments. Almost 86 per cent respondents said that they increased investments during the quarter, compared to the same quarter, the previous year. Six per cent respondents indicated that there was an increase in investment of more than 41 per cent; 20 per cent increased investments by 21 to 40 per cent; 60 per cent indicated a rise of one to twenty per cent. While 10 per cent said that their investments remained the same, another four per cent saw a decrease in their investments.
Among the four parameters on which players are scaled, the highest growth in value during the second quarter was contributed by Sales Turnover at 5.71 points; Sell Through at 2.34 points, saw a moderate growth. Similarly, with an increase of 2.21 points, investments saw moderate growth but a rise in Inventory Holding at 2.31 points acted as a spoilsport, resulting in only mediocre growth on the index value. If players had managed their inventories well, this number could have been much better thereby pushing up the Index Value. Sell Through, considered an aspect having a direct impact on profitability proved that the quarter generated more profits than the same quarter of the previous year for nearly 77 per cent respondents.