Apparel retailers could see demand rebound in Q4

Apparel retailers will see demand returning to preCovid levels by the fourth quarter of this fiscal. However, for the entire fiscal, revenues will be down by 40 to 45 per cent.

In the June quarter, revenues of apparel retailers were less than 20 per cent of the pre-Covid levels, finds India Ratings and Research. Players with exposure in value retail and presence in tier-2 and tier-3 cities were placed better than retailers primarily in metros.

However, the upward sales trend witnessed in June 2020 slowed down by intermittent lock-downs across the country and the pandemic spreading to non-metro cities. Despite about 80 per cent of stores being open as of August, the sector could only witness a slow-but-incremental recovery with the social distancing norms in force, leading to reduced footfalls in stores and prioritisation of spends towards essentials and low-ticket discretionary items amidst a squeeze on income levels.

Sales in the quarter remained around 45 per cent of the pre-Covid levels.

As per the Retail Business Survey of Retailers Association of India, July sales of apparel and clothing category were down 69 per cent. Strict lockdown in several states during weekends are crippling the business of retailers.

In the December quarter, Ind-Ra expects a meaningful recovery, driven by the pent-up festive and wedding season demand. However, social distancing norms and a slowing economy will continue to be a drag. Overall, sales may touch around 85 per cent of the pre Covid levels. Consumer behaviour patterns such as revenge buying may also support sales.

By the March quarter, pre-Covid level demand can be achieved, with economic recovery accelerating. The lower base effect from the Covid-hit March quarter of the previous fiscal will also support year-on-year quarterly revenues.

However, for the entire fiscal, the sector revenues may fall 40-45 per cent year-on-year. FY22 will see a sharp recovery with a lower base effect and new store openings. PostCovid-19, the trend of shift to organised from unorganised would accelerate as small players would find it difficult to sustain operations, given lower footfalls, apprehension among customers related to store hygiene and credit crunch.