Fashion retailers to see revenue growth of up to 15% in FY25

Fashion retailers will see revenue growth of up to 15% in FY25 according to ICRA, largely due to network expansion. Despite facing inflationary pressures, the segment is expected to maintain stability, with operating profit margins projected to be between 13-14%. This growth will be bolstered by the festive season and the launch of new stores.

According to a report by ratings agency ICRA, the fashion retailers are anticipated to achieve up to 15% revenue growth in FY25, largely driven by network expansion. This expansion is expected to bolster revenue growth in the current fiscal year, despite inflationary pressures, with ICRA maintaining a “stable outlook” for the fashion retail industry.

The agency stated, “The operating profit margin (OPM) of its sample set of companies is likely to remain in the range of 13-14 per cent in FY2025. This is despite a robust 14-15 per cent YoY (Year-on-Year) revenue growth estimated for the year, supported by network expansion.”

ICRA forecasts marginal sequential sales growth for fashion retailers in Q2 FY2025, partly due to the festive season being pushed to Q3 this year. The sector has experienced a demand slowdown since Q4 FY23 as a result of inflationary challenges.

In Q1 FY25, however, fashion retailers in ICRA’s sample set reported an 18% year-on-year increase in sales, supported by expanding store networks and the introduction of new product categories. The premium segment saw a 3% drop in average sales per square foot (ASPSF) in the June quarter, while the value fashion segment showed positive growth, reaching pre-pandemic levels for the first time.

Despite these gains, the margins for fashion retailers remained flat year-on-year, indicating lower-than-expected returns. This was primarily due to increased advertising and promotional expenses associated with opening new stores and launching new product lines.