The fashion industry has been booming for a few months. Sales of fashion retailing companies are indicating this. In the first nine months of the current financial year, the income of fashion retailing companies increased by about 55%. This was largely driven by strong sales due to festivals during the October-December quarter. Experts of this industry believe that the sales in January-March may be a bit dull, but the sales of fashion retailers are expected to increase by 45% in the entire financial year 2022-23.

Rating agency ICRA has said in one of its reports, ‘Economic activities picked up pace after the pandemic. People spent more on branded apparel. Because of these, the income of the fashion retail sector increased by 55% between April-December 2022.

This is 35% more than the income earned in the first 9 months of the pre-Covid i.e. FY 2019-20. This performance of the fashion retail sector was helped by the opening of additional stores of about 5 million sq. feet between 2019-20 and 2021-22. Companies increased capital expenditure by 55% to Rs 1,400 crore this fiscal.

Impact of inflation on the value fashion segment
In the last nine months, sales of premium brands increased in major cities. But in the value-fashion segment, companies are facing the impact of inflation in the sale of apparel. Companies reported negative growth in value-fashion segment sales in the same period of the current financial year as compared to the first nine months of 2019-20.

Margins expected to contract at 7-7.3% due to cost increase
Sakshi Suneja, vice president and sector head (corporate ratings), ICRA, said fashion retailers are passing on the increased cost of raw materials to customers. Their gross margin in April-December 2022 remained the same as in 2021-22. Rent, employee cost and advertising expenses have increased. Due to this, the operating profit margin of fashion retailers is likely to be 7-7.3% in 2022-23, despite the rapid growth in earnings. This is less than pre-covid.