Sales of clothing decline due to pricing pressure
The apparel industry has witnessed a slowdown in discretionary spends by consumers over the past few months, primarily because of inflationary pressures, with an impact of around 10-12%, according to industry players.
“Whether it was Durga Puja or Diwali, this year’s festive season was not that great for the industry,” said Rahul Mehta, president of Clothing Manufacturers Association of India, adding: “After that too, especially in December, markets slowed down quite significantly. That is also reflecting in summer bookings by our members right now.”
“By and large, inflationary pressures are hitting the middle class, and therefore, their discretionary spending has been limited because buying clothes is something you can always postpone. While there has not been much impact on the kids category, the adults category has been hit,” he added.
Sanjay Vakharia, CEO of Spykar Lifestyles, said to some extent people are becoming wary of their spends and some conservatism can be observed in the last few months. “On an average, we feel sales could have been better by 10-15% than what they have been so far,” he said.
Some industry players pointed out that this slowdown was not just the general lull after the festival season, but even during Durga Puja or Diwali, when consumers generally spend more on clothes, people spent conservatively this time.
This was also reflected in the quarterly results of Avenue Supermarts, which operates the DMart retail stores. The company said the FMCG and staples segment outperformed the general merchandise and apparel segments during October-December. This mix deterioration due to tepid growth in apparel and general merchandise even hit the company’s margins during the quarter.
Analysts said high inflation impacted the discretionary spends in Q3, which surprisingly impacted even a “deep value retailer” like DMart.
According to a report by Kotak Institutional Equities, apparel and some other discretionary categories suggest a sharp drop in discretionary demand in the past few weeks. The slowdown in discretionary consumption is due to a combination of factors such as withering of pent-up demand, especially after the festive season, or elevated inflation hitting household savings. The brokerage does not see a rapid turnaround in demand, given the underlying economic challenges, but they expects recovery in the staples volumes.
Iterating the same view, Mehta said while there has been a slowdown in demand in the apparel industry so far, people are also likely to remain wary in the coming months.