Apparel exports are anticipated to experience a modest recovery with a projected growth of around 8-9 percent in revenues, according to ICRA. This revival is expected to be driven by increased demand for stock replenishment in the US and EU markets.
Retail apparel brands in the US and EU collectively represent nearly 55% of global apparel trade. They are anticipated to reduce their high inventory levels and place orders for the summer 2024 season in the first half of fiscal year 2025.
“Following a slight revenue dip in FY2024, ICRA anticipates apparel-exporting companies to show a rebound in FY2025 due to replenishment of stock in the US and EU regions,” stated Priyesh Ruparelia, Vice President and Co-Group Head of Corporate Sector Ratings at ICRA.
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A challenging operating environment has delayed significant capital expenditure investments for many participants. Nevertheless, with the anticipation of demand resurgence in FY2025 and the strategic initiatives of industry players to leverage the China Plus One movement, ICRA anticipates an uptick in capital expenditure spending in FY2025.
The Red Sea conflict has not resulted in any immediate cost impacts on apparel exports, aside from shipment delays of 15 days from the original schedule.
Additionally, the report indicated that the PM Mega Integrated Textile Region and Apparel (MITRA) scheme will enhance India’s position in the global apparel trade by offering economies of scale and bolstering the country’s presence in the MMF supply chain.
Furthermore, the operating margins of apparel exporters are expected to decline to 9.8-10% in FY2024 from 11.3% in FY2023, attributed to a comparatively weaker operating performance in the first nine months of FY2024 and a reduction in volumes resulting in decreased operational efficiencies.
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