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ICRA predicts a 13% YoY revenue growth in FY2024 for the fashion retail sector

Sakshi Suneja, Vice President & Sector Head – Corporate Ratings, ICRA Limited has predicted that India’s fashion retail sector is likely to see a ~13% YoY revenue growth in FY2024.

“CY2023 started on a weaker footing for the fashion retail sector, as the players struggled with a demand slowdown following inflationary pressures. The slowdown remained more pronounced in the value fashion segment. While there has been a sequential uptick in performance of the sector in the last quarter of CY2023, led by festive and wedding season demand, ICRA’s channel check suggests that the same remained flattish vis-à-vis last year’s festive season sales,” she Sakshi Suneja said.

“Factors such as favourable demographics and low penetration of organised retail augur well for the industry. This, coupled with network expansions by retail players, is likely to result in a ~13% YoY revenue growth in FY2024. Higher discounts, following a demand slowdown, and increased advertising and promotion expenses to support revenue growth, are likely to exert pressure on the operating margins (IGAAP) of fashion retailers in FY2024, leading to a moderation of about 120 bps to ~5.2% in FY2024,” she added.

In June 2023, Suneja had said that the fashion retail sector has been facing demand slowdown due to inflationary pressures. She had noted the slowdown was more pronounced in the value fashion segment, with sales per square foot below pre-pandemic levels. Premium segments also showed signs of a demand dip in the fourth quarter (Q4) of FY 2023, according to a press release by ICRA.

She had also projected demand pressures to last until the first half (H1) FY 2024, but anticipated an improvement with the onset of the festive season and continuous network expansion, which could result in an estimated 10 per cent revenue growth for FY 2024.

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