Up to 15% revenue growth expected for fashion retailers in FY25: Icra

Fashion retailers are likely to record revenue growth of up to 15 per cent in FY25 on the back of network expansion, according to a report by ratings agency Icra. The network expansion of fashion retailers would support revenue increases in the current fiscal year despite inflationary headwinds, said Icra, while giving a "stable outlook" on the fashion retail segment.

"The operating profit margin (OPM) of its sample set of companies is likely to remain in the range of 13-14 per cent in FY2025. This is despite a robust 14-15 per cent YoY (Year-on-Year) revenue growth estimated for the year, supported by network expansion," it said. Given that Q3 of this year is when the festive season is expected to occur, Icra anticipates fashion retailers to report a slight increase in sequential sales in Q2 of FY 2025.

Due to inflationary pressures, the fashion retail category has been seeing a decrease in demand since Q4FY23. Nonetheless, fashion retailers in Icra’s sample set reported YoY sales increase of 18 per cent in Q1 FY ’25, driven by new product category introduction and store network expansion.

The value fashion sectors showed some encouraging growth and reached their pre-pandemic level for the first time, but the premium segment reported a 3 per cent decline in average sales per square foot (ASPSF) in the June quarter. However, on a year-over-year basis, the margins of fashion retailers stayed unchanged, indicating lower-than-commensurate returns because of higher A&P expenses, which went mostly towards opening new stores and launching new categories, the report stated.

(Source: PTI)