CMAI’s Q4 Apparel Index indicates moderate growth at 3.79 points

CMAI’s Apparel Index for Q4 Jan-March FY 2015-16 indicates the industry managed to clock in moderate growth with an overall Index value of 3.79 points. Giant brands (with a turnover of above Rs 300 crores) and large brands (with a turnover of above Rs 100 to 300 crores) however, maintained their growth trajectory, even though their pace slowed down compared to previous quarters. However, they were ahead of small (with turnovers of Rs 10 to 25 crores) and mid brands (turnover of Rs 25-100 crores). Giant and large brand did better with indicators like ‘Sales Turnover’ but ‘Sell Through’ was slightly lower than previous quarter.

Giant and large brands maintain lead

Much like the previous three quarters, in Q4 too, it’s the bigger brands who did better in sales turnover. Overall ‘Inventory Holding’ improved a little over last quarter. And among the bigger brands, it’s the large brands who managed better sell through at 1.38 points compared to giant brands 1.29 points in this quarter. But giant brands had much less inventory holding thereby indicating they were quicker to clear off stocks through discount sales.

And much like previous quarters, small and mid brands lagged behind with lower sales turnover and sell through, inventory holding and investment don’t reflect any particular trend. Mid level brands despite having higher inventory holding than small brands have indicated better index values because of higher points in every aspect. Kunal Mehta, VP-Marketing and Business Development, Being Human Clothing (Mandhana Industries) explains how for increased sell through, inventory holding also increased, “We have witnessed a great season-on-season sell through owning to the new and increased styles in categories such as denim, shirt, T-shirt etc. Order management is the key to any good inventory holding, and we have ensured that this process is enhanced every season to ensure that we can hold more inventories and plan our stores well.”

The Index reflects that large and giant brands have consistently done better compared. And small brands have grown the least since positive attributes like sales turnover, sell through and investments are not contributing enough and higher inventory holding is slowing down growth. Index pattern like earlier quarters continues to reflect as the size of the brands goes up, performance improves. While mid brands have performed better compared to small brands but they still have a significant gap with bigger brands. Bidhyut Nath, Head Advertising and Marketing, Dollar, explains, “Dollar industries have been diversifying in premium apparel segment for the last two years. There were new brand launches in premium segments. Hence, both production and advertising increased in the last one year.”

As Anant Daga, CEO, W and Aurelia says they increased their investments as they saw an increase in sales turnover and sell through in the quarter, “Aurelia is expanding, the products are being received well in the market and we are seeing a robust same store sale growth.” Generally, Q4 is known for low sales, except for EOSS in the month of January, and findings for this quarter reveal that sales buoyancy for the overall apparel industry was not as per expectations. Perhaps, this could be because of small and mid Brands’ low growth in index, which is dragging down the overall index. On the other hand, giant brands have improved all other aspects over previous quarter except sales turnover. Hence, the index value is lower than previous quarter. For mid brands all aspects were better in previous quarter therefore there is a significant fall in growth this quarter (5.88 against 7.92 in previous quarter). This is also partly why the overall index dipped in Q4.

A close look at sales turnover and inventory holding reveals the reason for small brands not growing as much is because increase in inventory holding is quite high at 2.29 points and the improvement in sales turnover is 2.4 points, this improvement is getting largely offset by increased inventory holding. A moderate increase in sell through at 1.18 and investment at 1.47 failed to give required boost in index value. The overall picture reveals that large and giant brands have not grown as much as last quarter, since they couldn’t manage much higher sales turnover like they had in previous quarter.

CMAl's Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands in taking informed business decisions. For investors, industry players, stakeholders and policymakers the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is analysed on assessing the performance on four parameters: Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in brand development and brand building. The Apparel Index research is conducted by DFU Publications.