When will people start buying clothes? Recovery expected only next year; firms to do this to weather storm

Post coronavirus time is expected to bring a shift towards organised sector as small players would find it difficult to sustain operations, given lower footfalls.

The Apparels and textiles sector is likely to continue facing the headwinds of the coronavirus pandemic till the beginning of the next financial year as demand remains sluggish on the back of economic slowdown. However, a recovery in demand is expected with the beginning of the festive season in India, a report said on Tuesday. “Ind-Ra expects a demand recovery from the second half of 3QFY21 during the festive season, assuming that COVID-19 related fears will subside,” the India Ratings and Research report said, adding that the industry will rebound by FY22 and will reach closer to levels seen in FY19. 

“FY22 will see a sharp recovery year on year with a lower base effect and new store openings as the organised sector’s share continues to grow.” In fact, the post coronavirus time is expected to bring a shift towards organised sector as small players would find it difficult to sustain operations, given lower footfalls and increased apprehension among customers related to store hygiene and sanitisation.

Exit plan

The main focus of manufacturers and retailers now is to liquidate existing inventory. “Ind-Ra expects companies in the apparel retail sector to weather the near-term demand volatility and sluggishness through effective liquidity management, while also improving their competitive advantage,” the report said.  This includes increasing operational efficiencies and controlling costs and cash preservation. 

Meanwhile, a continued country-wide lockdown beyond the second quarter of ongoing fiscal 2020-21 may prolong pain for the textile and apparels sector. 

What’s plaguing apparels, textiles sector?

With coronavirus hitting countries across the globe and closing of borders, the textile and apparels industry reported a major dive in revenues and sales as international customers deferred orders from Indian suppliers. Domestic sales were also down, leaving manufacturers with pent-up inventory. In fact, the same inventory may not prove useful for the manufacturers in the future as the fashion industry is highly dynamic, according to a recent webinar by CARE Ratings. The industry is likely to sustain 40-45% revenue loss in FY21. 

An economic downturn, job losses, and lower household incomes also mean reduced discretionary spending,