According to a recent analysis by stockbroker Motilal Oswal, huge organized apparel retailers such as Trent, Aditya Birla and Retail Ltd (ABFRL), and V-Mart are expanding in India.
The analysts at the brokerage had channel checks with these retailers; both listed and unlisted.
Due to the slow store additions in the near past, as compensation, they decided to launch stores in many parts of the nation.
They added in a note on the industry that most well-capitalized big retailers have resumed their aggressive goals to add approximately 15-20% to their store footprint compensating for the past years’ modest additions.
A consistent stream of new stores is now being built, which should maintain the pace of store additions manageable for most players.
The report stated that Trent has a good pipeline of 75-80 Zudio store additions and 35-40 Westside store additions in the Fiscal Year 2022, FY22 (20-25 stores of Westside or Zudio were already added in the first half of FY22).
Annual store footprint expansions of 15-20% are predicted at ABFRL, V-Mart, and Shoppers Stop, according to the research.
The survey also stated that apparel retailers had a consistent performance in the third quarter of the current fiscal year, but the demand in December was described as “sluggish”.
It also briefed about the reason behind the performance, due to fewer festival and wedding-related spending occasions, consumption weariness following a period of pent-up demand, and consumers and local governments being more aware of the spike in COVID-19 cases.
According to the report, Urban markets surpassed the performance of rural markets with tier 2 and 3 markets that barely reached the pre-COVID performance levels.
However, Exclusive Brand Outlets (EBOs) reported stronger recovery than those multi-brand stores interestingly in the distribution channel.
The report explained that this might be attributed to “poor performance in tier 2 and tier 3 cities, which is the core market for Multi Brand Outlets (MBOs).”
And also because of the limited liquidity of smaller channel partners, and the increasing penetration of online players in tier 2 and 3 cities.
Increased input costs are also encouraging apparel retailers to ponder over price hikes. The brokerage also added that cloth retailers have raised prices by 7-8% in the recent few quarters.
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