Indian apparel retailers witnessed sluggish sales in the first quarter (January to March) of 2024, according to reports from several brokerages. This comes amidst a combination of factors including lower disposable incomes and a high sales base from the same period last year.
Brokerage reports attributed the weak demand in January and February to a lower number of weddings during that time. This highlights the apparel sector’s dependence on seasonal events and discretionary spending.
In contrast, the jewellery sector reported a positive outlook. Higher gold prices throughout the quarter are expected to translate into strong growth for jewellery companies. IIFL Securities cited Titan’s healthy 18 per cent year-on-year growth in its jewellery business as an example, projecting a 13.3 per cent EBIT margin for the company (excluding bullion).
Additionally, the brokerage also anticipates Titan’s continued high-teen growth in the medium term, fueled by a growing shift towards organised retailers in the jewellery market.
While the overall apparel sector faced challenges, reports suggest some variation in performance. Brokerage reports indicated an expected aggregate revenue growth of 21 per cent for apparel retail companies under their coverage. However, excluding Trent, this figure is adjusted to 11 per cent. This suggests that some companies may have fared better than others.
Further, Phillip Capital noted a positive trend in March, where sales improved due to festival demand. In addition, the report highlighted a decrease in discounting activity during the quarter, potentially indicating a shift towards more stable pricing strategies. This, along with signs of rising consumption in smaller Indian cities (Tier-II and Tier-III markets), could foreshadow a potential increase in apparel sales in the coming quarter.
However, brokerages like Emkay cast a cautious outlook on the apparel sector, citing weak trends in fashion, apparel and innerwear. They attributed this to pent-up demand fulfilled in the previous year, coupled with the current limitations on disposable income. The brokerage expects single-digit growth for major players like Page Industries and Aditya Birla Fashion and Retail’s core business, with GoColors potentially outperforming with a mid-teen growth estimate.
Motilal Oswal offered a more optimistic view for Page Industries, projecting a 9.8 per cent year-on-year revenue rise due to seasonal factors and a favourable base effect. They also anticipated an increase in gross margin and EBIT margin for the company during the quarter.
The contrasting situations between the apparel and jewellery sectors highlight the current dynamics of the Indian retail market. While discretionary spending in apparel remains subdued, the allure of gold as an investment and a cultural symbol continues to drive demand in the jewellery sector.
