India Ratings and Research remarked earlier on Monday in a note while estimating its revenues in retail sector as apparel retailers would be closing Financial Year 2021 along with a sombre decline of a 40-45% in revenues, but however a the same time, food and grocery retailers are likely to report a 5 or 10% reduction. However, it also estimated that the sector’s demand might recover in the second half of the year and turn out to be well into Financial Year 2022.
The agency has also estimated that a threefold jump might also take place in online sales for retailers in the current fiscal. Amid the Covid-19 lockdown in India, several retailers have been affected, however, marking a slump in the apparel business due to the reduced need of outgoing wear. As the festive and the wedding season are both back in action and due to reduced restrictions of celebrations, the apparel industry is now slowly and steadily coming back to its segment.
Speaking about the estimates, the note’s author, Prateek Goyal said, “Ind-Ra expects the demand recovery to continue in 2HFY21 and FY22, primarily driven by the festive season demand, strong performance by the online channel, and share gain by the organized segment at the expense of the unorganized sector. The agency, however, maintains the full-year revenue decline to 5-10% for food and grocery retail, while apparel retail could witness a 40-45% decline in revenues for FY21 because of covid-19 led business disruptions and general economic slowdown.”
The note also mentioned that the retailers would have a promising third quarter as the demand and market are crawling back to normalized operations with increased consumption of some categories even when the ssocial distancing and slow economy concerns have been flagged around. For the third quarter, Ind-Ra expects food and grocery to hit more than 100% of pre-covid levels, and apparel sales to 80%.
Further, the significant shift would also take place where people would prefer online shopping scenarios for buying goods as the increase might take place by a factor of more than three in FY21. The note also added that the business via own websites or through online marketplaces is expected to raise to 10-15% of total sale by FY22.
“The brick-and-mortar presence of large retailers will continue to grow, as there are several untapped markets available outside tier-1 cities, given the low penetration of the organized market. Omni-channel presence may lead to the rationalization of store size and numbers, given high rental expenses,” it said.