Growth, however, will remain divergent across formats, with value retailers outperforming due to resilient tier 2 and beyond demand
Maintaining a neutral sector outlook and a stable rating outlook for the apparel retail sector, India Ratings and Research (Ind-Ra) stated that the sector revenues are expected to grow around 9 per cent year-on-year (YoY) in FY26 and 10.5 per cent YoY in FY27.
The report noted that growth, however, will remain divergent across formats, with value retailers outperforming due to resilient tier 2 and beyond demand and the ongoing shift from unorganised to organised trade. Conversely, premium, branded and ethnic players are expected to see steadier, high single-digit growth trends as consumer confidence rebuilds with a better spread out wedding calendar than in FY26 and early signs of normalisation seen in 9MFY26.
Listed apparel retail players from Ind-Ra’s sample set reported revenue growth of around 10 per cent YoY in 9MFY26, as the government’s consumption push through lower taxation and mild inflation resulted in higher disposable income and improved affordability. The operating profit margins also improved to 15.6 per cent in 9MFY26 as against 15.2 per cent in FY25 due to various cost optimisation measures adopted by companies.
“Strong aspiration-driven momentum in value and luxury segments and productivity‑driven expansion are expected to deliver higher revenue growth with expansion in profit margins during FY27,” says Adarsh Gutha, Associate Director, Corporate Ratings, Ind-Ra.
Organised retailers are pivoting from aggressive expansion to productivity‑led growth. After elevated store additions in FY24–FY25, retailers are moderating store roll‑outs, sharpening site selection, right‑sizing formats, and targeting faster ramp‑ups of recent openings, with omnichannel execution and scalable franchise models enhancing reach and capital efficiency.
Ind‑Ra emphasised that store additions are expected to ease to nearly 7 per cent YoY in FY26 and 6 per cent YoY in FY27, even as retail area continues to rise, reflecting larger average store sizes and assortments designed to lift footfalls, average transaction values, and sales per square foot.
