Apparel companies upbeat on demand revival

Apparel brands, manufacturers and retailers said the outlook for fresh buying of stock and inventory has improved after 3-4 quarters of subdued purchases, led by an improvement in demand during festive sales and retailers being able to clear out most of their old unsold stock.

One of the largest apparel manufacturers Arvind’s chief strategy officer Samir Agarwal told analysts a fortnight back that the inventory correction cycle, which was playing out for the last 2-3 quarters, has tapered off and its customers have begun fresh buying discussions. “Although they are going to buy in small lots and closer to the actual demand, those discussions have resumed,” he said.

Agarwal said the first half of the fiscal in the domestic market was “quite muted” in terms of the consumer demand because of the overbought situation from the last year. “As we opened this quarter in the initial few days of October, there seems to be some resumption in consumer demand and buying and like-to-like growth. Specifically, for premium and mass premium segments in the market, things are looking up,” he said.

Apparel manufacturer Gokaldas Exports, which mostly exports, expects the supply momentum to pick up in the second half of the fiscal, particularly with the third quarter production for spring 2024 as brands have more or less destocked their inventory and are increasing their order placements, said managing director Sivaramakrishnan Ganapathi.

Ganapathi told analysts that the company expects “sequential growth to trend up in the next two quarters” with a good order book. He said apparel imports by the US for the year to date fell 23% while by the EU fell by 13%, and major brands were consciously liquidating excess inventory holdings and controlling their purchases.

“When I talk to operators in Bangladesh, Vietnam, China, they have all seen a much higher degree of slowdown. So, in such a situation, it’s hard for anybody to outperform. The fact that India has dropped only 12% is a good sign I would say,” said Ganapathi.Even Indian apparel retailers and brands have controlled their purchases in the last 3-4 quarters with inventory piling up after the initial wave of high demand due to wardrobe refresh post Covid waned off after the 2022 festive season. Retailers and brands had to liquidate inventory with higher discounts.V-Mart Retail, for instance, said its total inventory reduced by ₹74 crore year-on-year in the September quarter despite the festive push and 15% more number of stores, which has helped it to improve the working capital cycle. The small town-focused retailer has already liquidated 70% of its older high priced inventory and the balance 30%, which is winter products, will be liquidated in the next two quarters.

Aditya Birla Fashion and Retail management told analysts last week that the company could not “anticipate the slowing of demand fast enough and therefore there was an inventory build-up”, which has been liquidated in the end of season sales.