CMAI’s Apparel Index
A Report on CMAI’s Apparel Index for Q3, which shows a growth recovery for all Brand Groups.
CMAI’s Apparel Index for the third quarter (Oct-Dec 2017-18)
CMAI’s Apparel Index for Q3 (Oct-Dec FY 201718) gives out positive signals about the market, as there is a clear growth recovery at 2.71 points. This is much higher than the figures from the same quarter (Q3) in the previous year (OctDec FY 2016-17), which had an overall Index Value of 1.4 points. The market had registered the lowest growth in that quarter, since it faced the immediate aftermath of the implementation of demonetisation.
GIANT BRANDS REMAIN RESILIENT
Despite the push and pull experienced one year post-demonetisation and a few months after the GST implementation, Giant Brands have remained resilient and buoyant. In Q3, they maintained their lead with an index value of 11.25 points, growing multiple times compared to other brand groups. Large Brands, on the other hand, grew at 5.56 points; Mid Brands recorded 3.69 points of growth; while Small Brands grew least at 1.3 points.
Compared to previous quarters, Giant Brands are growing much faster than others, as their rate of growth in the previous quarter was 8.72 points. The growth rate for Large Brands was 6.65; 1.25 points for Mid and 0.29 for Small Brands, respectively.
Indeed, all brand groups across the board have recorded higher growth this quarter, except for Large Brands (growth dropped this quarter to 5.56, from 6.65 earlier). Surprisingly, Large Brands grew 7.23 points in the same quarter of the previous year. A closer look at the Large Brands’ performance during Q3 and Q2 of FY 2017-18, reflects that in both these quarters, Sales Turnover growth is same, but Sell Through grew better in the previous quarter, compared to this quarter. Inventory Holding, too, increased this quarter, compared to previous quarter, impacting negatively. The remarkable growth improvement of Giant Brands is on account of better Sales Turnover growth, compared to previous quarter, and better Sell Through growth.
Q3 Apparel Index, once again, indicates that Giant Brands have outdone Large, Mid and Small Brands. Being more organized and networked with organized retail through MBOs, EBOs and Large Format Stores, Giant and Large Brands managed their business and sales turnover better. Moreover, they increased their sales turnovers significantly – at 8.0 points and 4.4 points, respectively.
INSIDE STORY: SALES TURNOVER RISE; SO DO FRESH INVESTMENTS
In Q3, Sales Turnover reflected an Index growth of 1.52. Nearly 49 per cent brands, or almost half, reported an increase this quarter. However, it seems the festive season didn’t bring much cheer to all brands, as many reported a dip in sales turnover. A significant 30 per cent reported a loss this quarter. Incidentally, most of the respondents, who reported a loss in sales
turnover, were in the Mid Brands bracket. In fact, no Giant Brands indicated a loss in turnover in Q3. Explaining the dip in sales turnover, Narendra Shah, Proprietor, Vogartino says,“The dip in sales turnover is partly due to our changing location, and majorly due to the pattern of business followed by corporate brands. End of season sales affected not only our brands, but also MBOs, small industries and manufacturers. Big corporate brands gave away goods at throwaway prices, and this had a great impact on our business, causing the dip in sales turnover.”
Nearly 45 per cent brands indicated an improvement in Sell Through. But, for the other 44 per cent, Sell Through remained the same. “The increase in sell through is connected; if sales turnover increases automatically, sell through will increase, as sales have been managed well,” explains Sameer Patel, Proprietor, Deal Jeans.
Almost 46 per cent respondents across all brand groups said their Inventory Holding went up this quarter. Patel opines, “Inventory holding increased, as fashion is fast changing and the inventory is managed and controlled well at our end.” The higher value in Inventory Holding indicates a negative impact. The increase in inventory could be due to a carryover of inventory from previous quarters and/or due to the lower than expected sales during the festive season. Rajesh Giani, Proprietor, Toffy House points out, “The last quarter was the season for winter wear, hence, demand was good and stocks were stored for winter. We had some previous stocks and with late production of fresh stocks, we were able to meet demand. This is why inventory holding went up.”
Fresh Investments went up by 1.30 points overall, with nearly 59 per cent respondents reporting a rise in investments. As Seema Mehta, Proprietor, Exile explains, “The reason behind an increase in investment is a government scheme, which helped us with a bank loan to enhance business. We opted for it and infused money to increase our investments.” Ketan, Owner, Goof goes on to explain, “We increased our investments by opting for a bank loan, to widen our horizons.”
As for the outlook for the next quarter, around 48 per cent brands say it is ‘Average’, while 38 per cent believe the outlook is ‘Good’. Generally, Q4 of the financial year is seen as a quarter that has EOSS in January and only a small period of fresh inventory. Growth in sales is seen in the second half of March, when students’ exams are over and holidays start, and summer season picks up. Looking for fresh goods, post the first quarter of GST, consumers are also expected to return to stores. GST and new processes would be settled; especially by the last quarter of this financial year and this could augur well for growth in Q1 of FY 2018-19.
ABOUT CMAI’S APPAREL INDEX
CMAl’s Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands make informed business decisions. For investors, industry players, stakeholders and policymakers, the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is based on an analysis and assessment of the performance on 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. The Apparel Index research is conducted by DFU Publications.