CMAI’s Apparel Index for Q3 (Oct-Dec FY 2017-18) gives out positive signals about the market as there is a clear growth recovery at 2.71 points, which is much higher than the same quarter previous year Q3 (Oct-Dec FY 2016-17) with overall Index Value at 1.4 points, market had registered the lowest growth, in the quarter that faced the implementation of demonitisation.
Giant Brands remain resilient
One year post-demonization and a few months after GST’s implementation, despite the push and pulls, Giant Brands have remained resilient and buoyant. In Q3, they maintained their lead with an index value of 11.25 points, growing multiple times compared to other brand groups. Large Brands on the other grew at 5.56 points; Mid Brands clocked in 3.69 points growth; while Small Brands grew least at 1.3 points. Compared to previous quarters, Giant Brands are growing much faster than others, as their rate of growth in the previous quarter was 8.72 points. Large Brands growth rate was 6.65; and 1.25 points for Mid and 0.29 for Small Brands respectively.
Indeed, all brand groups across the board have recorded higher growth this quarter. Except, Large Brands (growth dropped this quarter to 5.56 from 6.65 earlier). Surprisingly, Large Brands grew 7.23 points in the same quarter previous year. A closer look at Large Brands’ performance during Q3 and Q2 of FY 2017-18, reflects in both these quarters, Sales Turnover growth is same but Sell Through grew better in previous quarter compared to this quarter; Inventory Holding too increased this quarter compared to previous quarter impacting negatively. Giant Brand’s remarkable growth improvement is on account of better Sales Turnover growth compared to previous quarter and better Sell Through growth.
Q3 Apparel Index once again indicates Giant Brands have outdone Large, Mid and Small Brands. Being more organized and networked with organized retail through MBOs, EBOs and Large Format Stores Giant and Large Brands managed their business and sales turnover better. Moreover, they increased sales turnovers significantly at 8.0 points and 4.4 points respectively.
Inside Story: Sales Turnover rise and so do fresh Investments
In Q3, Sales Turnover reflected an Index growth of 1.52. Nearly, 49 per cent brands or almost half reported an increase this quarter. However, it seems, the festive season didn’t bring much cheer to all brands, as many reported a dip in sales turnover. And a significant 30 per cent reported a loss this quarter. Incidentally, maximum number of respondents who reported a loss in sales turnover were in the Mid Brands bracket. In fact, no Giant Brands indicated a loss in turnover in Q3.
Explaining the dip in sales turnover, Narendra Shah, Proprietor, Vogartino says “The dip in sales turnover is partly due to us changing location and majorly due to the pattern of business followed by corporate brands. End of season sale hit not only us as a brand but also MBO’s, small industries and manufacturers. Big corporate brands gave away goods at throwaway prices which has had a great impact on our business hence, the dip in sales turnover.” Nearly 45 per cent brands indicated an improvement in Sell Through. But for the other 44 per cent, Sell Through remained the same “The increase in sell through is connected, if sales turnover increases automatically sell through will increase as sales have been managed well,” explains Sameer Patel, Proprietor, Deal Jeans.
Almost 46 per cent respondents across all brand groups said their Inventory Holding went up this quarter. Patel opines, “Inventory holding increased as fashion is fast changing and the inventory is managed and controlled well at our end.” The higher value in Inventory Holding indicates a negative impact. The increase in inventory could be a carryover of inventory from previous quarters and less than expected sales during the festive season. Rajesh Giani, Proprietor, Toffy House points out, “Last quarter was for winter wear, hence, demand was good and stocks were stored for winter. We had some previous stocks and with late production of fresh stocks, we were able to meet demand. This is why inventory holding went up.”
Fresh Investments went up by 1.30 points overall with nearly 59 per cent respondents reporting a rise in investments. As Seema Mehta, Proprietor, Exile explains, “The reason behind an increase in investment is a government scheme which helped us with a bank loan to enhance business. We opted for it and infused money to increase our investments.” Agrees Ketan, Owner, Goof who goes on to explain “We increased our investments by opting for a bank loan to widen our horizons.”
As for outlook for the next quarter around 48 per cent brands say it is ‘Average’, while 38 per cent believe the outlook is ‘Good’. Generally, Q4 of the financial year, is seen as quarter that has EOSS in January and only a small period of fresh and growth in sales that is second half of March when exams are over and holidays start and summer season picks up. Looking for fresh goods, post first quarter of GST, consumers too are expected to return to stores. GST and new processes would be settled especially by last quarter of this financial year and this could augur well for growth in Q1 of FY 2018-19.
CMAl's Apparel Index
CMAl's Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands in taking informed business decisions. For investors, industry players, stakeholders and policymakers the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is analysed on assessing the performance on four parameters: Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in brand development and brand building. The Apparel Index research is conducted by DFU Publications.