It’s food not fashion where price pinches as shopping bags, retailer coffers are swelling

• The Indian retail companies’ revenue grew by a third in the fiscal year 2022 that ended in March.
• This was mainly possible due to customers buying more clothes and footwear than ever before.
• Clothes and footwear even got more expensive in this period due to the change in GST slab.

As malls re-opened and Covid restrictions were lifted, the first thing people seemed to have shopped for, are clothes. As they stepped out of homes after two years, Indians seemed to be intent on looking their best, and were probably itching for retail therapy all along.

As customers’ shopping bags got heavier and all retail brands from Shoppers Stop, Bata, Pantaloons and Lifestyle are reaping its benefits.

“Despite various headwinds, fashion retailers displayed a resilient show with demand picking up pace in the latter part of the second half of FY22. Revenue recovery rate for most apparel and footwear players surpassed pre-Covid levels (100- 105%) from Q3FY22 onwards,” a report by ICICI Securities added.

Unlike the FMCG players

Thanks to the surge in demand, fashion retailers faced none of the dilemmas that FMCG players faced. Due to input cost rise, the latter had to balance their price hikes and go for pack reductions to ensure consumers receive the minimum hit. Yet, their volumes suffered.

Apparel manufacturers dauntlessly passed on their input costs. In the months of April and May, the apparel inflation was as high as 10% as compared to the year before. Still, it had no effect on sales.

“As per Retailers Association of India (RAI), sales momentum has continued to sustain with 23% and 24% revenue growth in April and May, respectively (vs. 2019 levels). We expect apparel and footwear retailers to demonstrate strong traction in revenue and earnings growth in the ensuing quarters driven by improved consumer sentiment and enhanced demand scenario for discretionary products,” said the ICICI report.

The opening up of the market also coincided with the wedding season, a traditionally good sales month for apparel, leading to companies like Aditya Birla Fashion seeing good traction for their ethnic wear.

More stores in the offing

The Indian retail companies’ revenue grew by a third in the fiscal year 2022 that ended in March. ICICI securities, in its report, noted that it is higher than they had anticipated. The GST slab for some footwear and textile also increased more than twice during the year. Yet, the demand remained unfazed.

In an attempt to cash in on the customer demand revival, retail giants are now going heavy on adding more stores as well. The store addition trajectory improved significantly in the January-March quarter, and companies have a healthy store addition pipeline for the ongoing financial year as well.

“Retail sector appears to be on the cusp of delivering strong sustained revenue growth driven by improved consumer sentiment, wardrobe refresh and increased spend on discretionary purchases as consumer wallet share on non-essentials had remained subdued for the last two years,” the brokerage firm added.

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