Fashion retailers are likely to record revenue growth of up to 15 per cent in FY25 on the back of network expansion, according to a report by ratings agency Icra. The network expansion of fashion retailers would support revenue increases in the current fiscal year despite inflationary headwinds, said Icra, while giving a “stable outlook” on the fashion retail segment.
“The operating profit margin (OPM) of its sample set of companies is likely to remain in the range of 13-14 per cent in FY2025. This is despite a robust 14-15 per cent YoY (Year-on-Year) revenue growth estimated for the year, supported by network expansion,” it said.
Icra expects fashion retailers to report marginal sequential sales growth in Q2 FY2025, especially with the shift from the festive season to Q3 this year.
“The revenue growth is likely to pick up during the festive season, which coupled with regular network expansion, is expected to result in a 14-15 per cent YoY revenue expansion in FY2025,” it said.
The fashion retail segment has been struggling with a slowdown in demand since Q4FY23 due to inflationary headwinds.
However, in Q1FY25 fashion retailers in Icra’s sample set reported a YoY sales growth of 18 per cent, led by expansion in store network and introduction of new product categories.
However, the premium segment reported a 3 per cent contraction in average sales per square feet (ASPSF) in the June quarter, though the value fashion segments showed some positive traction and touched their pre-pandemic level for the first time.
The margins of fashion retailers, however, remained flat on a YoY basis, reflecting lower-than-commensurate returns, due to increased A&P expenses, mainly towards new stores and new categories launched, it said.
“The discount levels have remained limited since Q2 FY2024 as players focus on protecting their gross margins. Retailers, however, continue to spend aggressively on advertisement and promotions, especially with the festive season around the corner,” Sakshi Suneja, Vice President & Sector Head – Corporate Ratings at Icra, said.
