Indian fashion retail on strong growth path

As per India fashion brands & retail sector update by Emkay, fashion retail is poised for high growth with multiple short and long term catalysts. Revival in economic growth will lead to increase in disposable income, GST implementation and changing fashion consumption trends. Wazir Advisors, a renowned sector consultant expects fashion retail to grow at a CAGR of 12.2 percent over the next 10 years.

The report states that there exists a strong trend correlation between GDP growth and SSG. With revival in Indian economy, it expects fashion retail growth to be driven by higher same-store-growth, which will be more consumption driven rather than store network expansion driven, leading to higher profitability and return on capital. Along with the change in consumer mindset, evolving ecology is also playing an important role towards consumption of fashion products. Starting with mall culture to influx of international to e-commerce, all these entices higher awareness, better shopping experience leading to higher consumption,” report says.

The report endorses Arvind and Shoppers Stop and reiterates positive stance on Phoenix Mills and Page Industries because all four companies provide a unique value proposition in the fashion retail sector and have differentiated risk-reward profiles. Concerns surrounding the sector, as per the report are rising competitiveness with a plethora of brands entering the Indian market (although it believes it will lead to higher awareness of fashion and hence, overall expansion of pie) and elongated sale season seen in the last eight quarters (which should get addressed as market revives and sales pressure wanes off.