Apparel retail bounces back with positive Q1 growth

As the festive season takes off in India, apparel brands and retailers are in a joyous mood. And what’s making them happy is the positive momentum shown by the first quarter results of most of brands and retailers. Industry is attributing

the growth in net sales to a rise in buying compared to last two years.

The April to June 2013 quarter, most brands and retailers saw a sales growth of 23 percent over the year-ago period. Despite dismal June 2012 quarter, when consumer sentiment was down along with sales, overall industry is in a buoyant spirit owing to outstanding results of some companies.

Q1 profits on the rise

Along with a boom in net sales, companies also witnessed their operating profits rise with a robust 34 percent growth in the June 2013 quarter compared to last year. For example, while Page Industries, retailer of Jockey brand of innerwear, registered a 39 percent sales growth on the back of a strong 17 percent jump in volumes, Kewal Kiran, which owns brands, such as Killer and Integriti saw 31 percent sales growth.

Indian Terrain Fashions’ net sales/income from operations stood at Rs 40.86 crores for the quarter compared to Rs 26.35 crores for the quarter ended June 30, 2012. Its net profit was at Rs 2.26 crores for the quarter as against Rs 0.23 crores for the quarter ended June 30, 2012. Similarly Lovable Lingerie reported net sales/income from operations of Rs 55.68 crores and net profit of Rs 13.03 crores against Rs 7.51 crores for the quarter ended June 30, 2012.

Factors leading to positivity

Many reasons have contributed together for this positive show. Many retailers benefited from lower rentals and fabric costs, which in turn helped them increase profits. Even brands were able to take advantage of the removal of excise duty on branded apparel. They were able to pass on the benefit to customers. Input costs as a proportion to sales have been correcting in the past three quarters. It was 44 percent for the June 2013 quarter as against 46 percent a year ago.

The results for the quarter also pointed to the fact that a stable cotton pricing coupled with removal of 10 percent excise duty has worked in favour of apparel industry bringing consumers back to the stores and malls despite inflationary pressure and rising product prices pinching their pockets.