India’s fashion retail sector is witnessing healthy sales growth in fiscal 2023 (FY2023) led by a pick-up in discretionary spending and normalisation of store operations post the pandemic. As per ICRA’s most recent analysis of the industry, retail entities in its sample set will see an exuberant year-on-year (YoY) increase in sales of around 45 per cent in FY2023.

The operating profit margins (OPMs) of the retail entities are, however, expected to remain range-bound at 7-7.3 per cent, due to significant increases in advertisement and promotion spending during the year. ICRA currently has a stable outlook on the retail sector, the ratings agency said in a press release.

“Driven by improved economic activity and an uptick in discretionary spends, the retail sector reported a robust 55 per cent YoY revenue growth in 9M FY2023. While this was admittedly partly led by a low base, it also reflects a sharp 35 per cent growth over the pre-pandemic period of 9M FY2020. This favourable performance was also aided by nearly 5 million square feet of additional store space set up during FY2020-FY2022. Segment-wise, the revenue growth is led by premium brands in the metros/tier-I cities. The value-fashion segment, on the other hand, is facing inflationary headwinds and reported a negative same-store-sales growth when compared with the pre-COVID period of 9M FY2020,” commented Sakshi Suneja, vice president and sector head, corporate ratings, ICRA.

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