CMAI’s Apparel Index for Q2 (July-Sept FY 2018-19) reveals, growth has fallen to almost a no growth level and touched 0.18 points. It is the lowest ever, in last five years. Small brands are the big losers with negative growth of -1.71 points. However, big brand’s (Mid, Large and Giant together) cumulative growth of 3.39 points (much lower than 6.55 points in the last quarter) also failed to pull up the Index significantly.
The Q2 Apparel Index recorded a meagre growth of 0.18 points. It is 10-times higher than the Index for Small brands (turnovers of Rs. 10 to 25 cr) which is – 1.71 points. For Mid brands (turnover of Rs. 25-100 cr), growth stands at 1.03 points, almost five-times that of overall Index, Large brands’ growth is 3.61 points, 20- times that of overall Index. Whereas, last quarter Large Brands growth was just three-times (2.95 times) that of overall Index.
But as usual, it’s the Giant brands that grew the most at 8.36, 46-times that of overall Index. Giant brands have consistently been doing well every quarter, their rate of growth this quarter is much more than others while being higher than the previous quarter.
At 0.18 points, overall Q2 Index is much lower than previous quarter’s (April-June FY2018-19) 3.24 points and Q2 of previous year, which was 1.87 points. While Big brands together have grown at 3.39 points, individually Mid, Large and Giant brands have grown at 1.03, 3.61 and 8.36 points respectively (previous quarter figures were: 6.35, 5.95 and 8.07 points). Only Large brands have shown some buoyancy. Mid and Large brands grew much lesser than previous quarter. Much like all previous quarters, the biggest brand group, Giant brands are continuously growing at the highest level, outgrowing any kind of recessionary trends. The gap this quarter is huge, in fact it’s the highest ever. Small brands, at -1.71 points, seem to be in a bad phase unable to pull along and reflect growth. They are not in a position to outsmart their business practices. Overall, growth Index is being pulled down by small players. In fact, Small brand’s continuously falling Index is certainly a point of concern. If Sales Turnover was to be considered as the only parameter for determining Apparel index, this quarter overall Apparel Index would have been negative at -1.80.
As sales turnover falls, investment on the rise
Sales Turnover: The cumulative Sales Turnover in Q2 reflected a dip for the first time at-0.72 (previous quarter was 1.88 points). Around 32 per cent brands reported an increase this quarter. Of these, 26 per cent grew between 1-20 per cent, 5 per cent grew between 21- 40 per cent and only 1 per cent grew above 41 per cent or more. The only brand group that recorded 41 per cent or more growth was in Large brands at 7.1 per cent. Around 23 per cent brands reported no change in sales growth. Manish Kapoor, Sales Director, Pepe Jeans observes, “The increase in Sales Turnover is primarily due to better planning and execution. In terms of early launch of season and better promotions.’’
Perhaps for the first time almost 45 per cent brands have reported a loss in Sales Turnover. Incidentally, besides Large and Giant brands, both other Small and Mid Brand groups reported sales losses. A whopping number of respondents who reported a loss in Sales Turnover were among Small brands (around 57.2 per cent), followed by Medium brands 43.8 per cent and Large brands at 14.3 per cent. However, no Giant brand indicated a loss in turnover in Q2. ‘’Since this is a festive period and sales goes up. We were able to get a good number of bookings. This has helped us increase Sales Turnover,’’ says Cantabil’s Head of Marketing Deepak Singla. The maximum drop in sales was in the -20 per cent to -1 per cent slab, as high as 39.7 per cent of Small brands, 37.5 per cent of Mid brands and 14.3 per cent of Large brands reported loss of Sales Turnover in this slab.
Sell Through: Recorded an Index growth of 1.14 this quarter, lower than 1.23 in previous quarter. Maximum growth in Sell Through was reported by Giant brands at 3.2points, followed by 1.1 points for Small brands, 0.9 for Large brands and 0.8 for Mid brands. “Sell Through has increased as cost realization is less. We were not able to make great profits as raw materials have become costlier but we have kept our prices constant. Hence, Sell Through has increased,’’ says Manu Chawla, Proprietor, Taiga Kids.
Nearly 53 per cent brands reported an improvement in Sell Through. However, 37 per cent brands saw no change and around 10 per cent recorded a dip in growth. Maximum improvement in Sell Through was in the 1 to 20 per cent slab with 25 per cent brands reporting growth. Among them, 35.7 per cent were Large brands and 27 per cent Small brands, Giant brands reported 14.3 per cent Sell Through followed by 12.5 per cent for Mid brands. Dare Jeans owner Paresh Dedhia points out ‘’There is an increase in expenditure as everything is correlated. Inventory Holding and Sell Through has gone up as the prevailing market is slow. Buying and placing orders has come down and the cash flow is slow, hence, expenditure has increased.’’
Inventory holding: Growth under this head is at 2.1 points, higher than 1.58 points recorded in Q1. Almost 64 per cent respondents across brands have said their Inventory Holding moved north this quarter, indeed a significant number and they were responsible for pulling down overall apparel index value. Increase in Inventory Holding impacts overall index negatively. Higher Inventory Holding indicates longer holding of inventories in warehouses or shop shelves.
While 35 per cent (same as previous quarter) reported an increase of 1-20 per cent, 26 per cent reported an increase of 21-40 per cent, 3 per cent said their Inventory Holding went up 41 per cent or more. However, 26 per cent respondents said it remained same as against 32 per cent in the previous quarter. At the same time, nearly 10 per cent indicated a dip in Inventory Holding, 8 per cent between 1- 20 per cent, 2 per cent between 21-40 per cent.
Investments: One positive aspect of Q2 is that fresh Investments have gone up by nearly 1.80 as against 1.70 points last quarter. Highest investments came from Mid brands at 2.3 points, followed by Giant brands at 2.0, Small brands at 1.8 and Large brands at 1.4 points. Overall, nearly 86 per cent respondents reported a rise in Investments which is much higher than 77 per cent in previous quarter, indicating most brands had to invest to manage and grow which means growth is not coming easily. Of these, 78 per cent brands increased Investments by 1-20 per cent, 8 per cent increased Investments by 21-40 per cent. And 13 per cent brands reported no change in investments. Only one brand among those surveyed reported a dip in investments. “We are expanding and since we are venturing new markets, we need to advertise to make our presence felt and this incurs cost. There are also some fixed expenditure in opening a new store etc., hence the expenses have gone up compared to last year,’’ points out Mayank Jain, GM, Monte Carlo.
Gap between Big and Small brands reduce marginally
A comparison between Small and Big brands indicates, the Index Value of Big brand’s is 3.39 whereas Small brands, which is -1.07, indicating a wide gap between the performance of Big brands versus Small Brands. The biggest gap is reflected in Sales Turnover. Big brands increased their Sales Turnover to 1.62 points, against a drop in Sales Turnover (-1.46 points) for Small brands. As socks brand Mustang’s partner Lubeina says, “We are cutting down lead times for deliveries having faster deliveries sent out. Smaller runs in manufacturing and faster deliveries have helped us in decreasing Inventory Holding.’’
Outlook: Promising for festive quarter
Around 50 per cent brands say the outlook for next quarter is ‘Average’, while 38 per cent believe it will be ‘Good’. Only 6 per cent feel the quarter will be ‘Excellent’. However, another 6per cent believe it will be ‘Below Average’. Comparatively the outlook recorded in previous quarter was ‘Good to Excellent’. Generally, in Q3 of the financial year a number of festivals come up with sales picking up, the overall mood is positive. However, this doesn’t seem to be reflected this time due to the lacklustre performance of Q2.
CMAl’s Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands in taking informed business decisions. For investors, industry players, stakeholders and policymakers the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is analysed on assessing the performance on four parameters: Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in brand development and brand building.