Apparel retailers' revenue may grow 25% in FY22

Mumbai: Apparel retailers are set to witness a 25 per cent jump in their revenues during FY22 after a 40 per cent fall in FY21 on account of the pandemic, a rating agency said on Wednesday.

On the profitability front, the operating margins will come at 5-7 per cent, which is higher than the break-even achieved last fiscal but lower than the pre-pandemic average of nine per cent, according to a report by Crisil Ratings.

"The sharp recovery seen in the second and third quarters this fiscal, and the expected healthy performance in the fourth quarter, will propel revenue to 75-80 per cent of the pre-pandemic level," its Senior Director Anuj Sethi said. The revenues are expected to trail the pre-pandemic level in FY23 as well despite an 8-10 per cent growth on sustained footfalls and waning impact of Covid-19, he added.

On the impact of the third wave, Sethi said it resulted in minimal disruptions to the operations of the brick-and-mortar retailers, courtesy of less-intensive restrictions and a much shorter duration of the infections. The industry players raised Rs 2,000 crore in equity to tide over the losses faced in FY21, which will help the credit profiles along with the surge in accruals in FY22, the rating agency said.

The agency analysed 35 apparel retailers that account for 25 per cent of the sector's revenue. Of these, eight representing 20 per cent of the sector's revenue have seen a strong recovery of up to 60 per cent growth in revenues on higher sales in festive season and weddings. Due to the lockdowns, all the sector players have upped focus on the omnichannel presence and the share of e-commerce in the overall pie is expected to double to up to nine per cent as compared to the pre-pandemic period, the agency said.