Business Bureau :
THE second wave of coronavirus infections reported from various pockets of the country has come as a “strong headwind” to fashion retailers, and is expected to delay the recovery back to pre-COVID-19 levels till FY23, domestic rating agency ICRA said on Sunday. The industry is set to show a revenue growth of 23-25 per cent on a low base in 2021-22, but that will not be sufficient to get the business performance back to the pre-COVID-19 levels, ICRA said in a report. The rating agency said the industry was recovering well till the second wave hit and sales had touched over 70 per cent of pre-COVID-19 levels by the December quarter of 2020.
Its Sector Head Sakshi Suneja said industry players adopted to several cost-saving measures by fashion retailers, including rental negotiations, salary and overheads rationalisation in FY21 to protect the businesses. They are expected to continue the same in FY22 also pending a revival in discretionary demand. “This is expected to support the operating profit margins (OPM) at around 4.1 per cent in FY22, though these will remain lower by around 2.50 per cent from FY20 levels,” she said. Credit profiles of retailers will improve in 2021-22 as compared to the year-ago period courtesy de-leveraging in balance sheets after capital infusions in FY21, she said.
The credit profiles will remain weaker than the pre-COVID-19 levels, Suneja added. “Expectations of increasing and widespread availability of vaccines in the coming months will drive recovery of the sector's revenues and profitability to pre-COVID-19 levels in FY23,” its co-group Head Priyesh Ruparelia said.