Fashion retail recovery on track
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Icra Ratings said in a report that fashion retail one of the worst COVID-19 hit sectors, is likely to see its revenue grow by 23-25% if there is no third wave. Though this is a welcome development as fashion retail was one of the most impacted COVID-19 hit sectors as high-street malls and other outlets remained shuttered, it will still be 20% lower than the pre-pandemic volumes. This recovery is on account of rising vaccination, the normalization of economic activities, a 55% fall in rentals in Q1 of FY2022, and over 50% YoY jump in the volume of online shopping. It added that expecting better recovery retailers are also likely to increase Capex by at least 45% this fiscal.
ICRA said that during July-August, the segment saw a healthy recovery to the tune of 70-85% of the pre-pandemic level sales. It noted that footfalls have increased, suggesting that this time around consumers are more comfortable in making repeat visits. This ongoing recovery is in contrast to a relatively muted recovery in Q2 of FY21 following the first wave. Though operating profit margins are expected to improve in FY22 on account of revenue growth, it will still be lower by around 450 bps from pre-pandemic levels, according to Sakshi Suneja.
The think tank added that the third wave can potentially shave off up to 40% of revenue.