CMAI's Apparel Index for Jan-March 2016 (Q4) indicates that the Indian apparel industry managed to clock in a moderate growth with an overall index value of 3.79 points. Giant brands (with a turnover of above Rs 300 crore) and Large Brands (with a turnover of Rs 100-300 crore) maintained their growth trajectory, even though their pace slowed down as compared to previous quarters. Small Brands (with turnovers of Rs 10-25 crore) and Mid Brands (turnover of Rs 25-100 crore) slowed down in this quarter. Giant and Large Brands did better with indicators such as their sales turnover but their sell through was slightly lower than in the previous quarter.
Giant and Large Brands maintain lead
Much like the previous three quarters, it is the bigger brands who did better in terms of sales turnover. Overall, 'Inventory Holding' improved a little over the last quarter. Among the bigger brands, it is the Large Brands who managed better 'Sell Through' at 1.38 points as compared to Giant Brands at 1.29 points in this quarter. But Giant Brands had much less inventory holding, thereby indicating they were quicker to clear stocks through discount sales. Much like previous quarters, Small and Mid Brands lagged behind with a lower sales turnover and sell through while inventory holding and investment don't reflect a particular trend. Mid Brands, despite having higher inventory holding than Small Brands, have indicated better index values because of higher points in every aspect. Kunal Mehta, VP, Marketing and Business Development, Being Human Clothing (Mandhana Industries), explains how inventory holding also increased for increased sell through, "We have witnessed a great season-on-season sell through owing to the new and increased styles n categories such as denims, shirts, T-shirts, etc. Order management is the key to any good inventory holding, and we have ensured that this process is enhanced every season to ensure that we can hold more inventories and plan our stores well."
Bidhyut Nath, Head of Advertising and Marketing, Dollar, explains, "Dollar Industries have been diversifying in the premium apparel segment for the last two years. There were new brand launches in premium segments. Hence, both production and advertising increased in the past one year." As Anant Daga, CEO, W and Aurelia, says, "We increased our investments as we saw an increase in sales turnover and sell through in the quarter. Aurelia is expanding, the products are being received well in the market and we are seeing a robust same store sale growth." Generally, Q4 is known for low sales, except for the EOSS in the month of January and findings for this quarter reveal that sales buoyancy for the overall apparel industry was not as per expectations. This could be because of Small and Mid Brands' low growth in the index, which is dragging down the overall index. On the other hand, Giant Brands have improved on all other aspects except sales turnover over previous quarter. Hence, the index value is lower than in the previous quarter.
A close look at sales turnover and inventory holding reveals the reason for Small Brands not growing as much. Inventory holding is quite high at 2.29 points and the improvement in sales turnover is 2.4 points but this improvement is getting largely offset by increased inventory holding. A moderate increase in sell through at 1.18 and investment at 1.47 failed to give the required boost in index value. The overall picture reveals that large and giant brands have not grown as much as they did in the previous quarter since they couldn't manage much higher sales turnover like they had in previous quarter.
CMAI'S Annual Apparel Index for FY 2015-2016
The apparel industry clocked in moderate growth in the four quarters of the fiscal year 2015-2016. The index value of 5.32 points during this period was much lower than the Apparel Index for FY 14-15 at 7.28. In fact, FY15-16 was a 'not so buoyant' period even with the presence of the festive season, perceived as a season that helps in making up for turnover losses as consumer sentiment is at its best at that time, not recording very high growth. The index value for the last quarter of the financial year 2015-16, registered the lowest growth at 3.79 among the four quarters and it grew the most during the July-Sept 2015 quarter at 6.68, indicating business growth during this quarter which is dominated by the EOSS and pre-festive quarter. This was closely followed by the April-June 2015 quarter, known for the summer season that generally sees rise in fresh sales.
Indicators dip in successive quarters
All indicators, i.e., sales turnover, sell through and investments, reflected a consistent fall in growth value in successive quarters right from the first quarter. The July-September 2015 quarter was the best performing quarter of FY 2015-16 except the inventory holding criterion, which showed a significant improvement perhaps due to the offloading of inventories during the EOSS. A comparison with last two financial years shows that the Apparel Index growth was much higher in FY14-15 as compared to FY15-16, which was 36% higher at 7.28 against 5.32 in FY 2015-16.Interestingly, a common pattern was that the index fell in the first three quarters in both years. But in the fourth quarter FY 2014-15, the index rebound strongly whereas in the fourth quarter of FY 2015-16, the growth further reduced. Analysis of the Apparel Index clearly indicates that it is important to manage the two most important interdependent parameters – sales turnover and inventory holding. The latter bogs down the Index; hence clearing inventories, even at discounts, gives a huge boost to the sales turnover. However, this does affect the sell through. Independently increased investment also adds to the sales turnover, unless the investment is entrapped in inventory holding, which further pulls down the growth.