Apparel retail sector is anticipated to undergo another quarter of slowdown, with the majority of establishments reporting flat to low single-digit growth in same-store sales during Q3FY24, as noted by ICICI Securities.
This can be attributed mainly to reduced footfall during the peak season, the influence of the World Cup on weekends, and the delayed onset of the winter season.
Early End-of-Season Sales in the Apparel Sector:
Consequently, the majority of brands have initiated their end-of-season sale, providing discounts of up to 65%, two weeks ahead of schedule in December 2023, as opposed to the usual one-month EOSS period in January.
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According to the Retailers Association of India (RAI) survey, retail sales in October and November 2023 exhibited a 7% increase compared to the corresponding period in 2022.
“We believe higher discounts are reflective of the relative stress in the underlying inventory, and hence, may be a leading indicator of business performance in the near term,” ICICI securities has said in its latest report.
The company surveyed the top seven retail companies, namely Shoppers Stop, Reliance Trends, Lifestyle, Pantaloons, VMART, Max, and Westside. Shoppers Stop leads the pack, offering the highest discount among its peers at 66%, ranging from 20-40%.
Reliance Trends, Lifestyle, and Pantaloons provided discounts of 40%, 41%, and 42%, respectively. This can be attributed mainly to Shoppers Stop engaging in more assertive private label discounting.
For branded products such as W, Aurelia, and Biba, Reliance Trends has presented the highest discount at 51%, surpassing the 45% offered by Shoppers Stop, Lifestyle, and Pantaloons on the same products.
VMART presented the lowest discount at 23%.
Private label retailers such as TRENT and VMART, exclusively dealing in their own brands, adhere to a stringent discounting-window policy, refraining from participating in the early end-of-season sale.
“We expect TRENT to keep its discounting window short (2-3 weeks) while maintaining focus on selling fresh products rest of the time. We reckon that Westside is experimenting with its EOSS model through late EOSS participation; during Q2FY24 it started EOSS from Aug 1 while its competitors started in Jul 23. Interestingly, Marks and Spencer and Reliance Trends have resorted to reverse strategy; long-period discounting (2 months),” ICICI securities has said.
Over the past 6-8 months, there has been a trend among most companies to either reduce price tags or offer substantial discounts, aiming to clear unsold inventory following price increases across all apparel categories last year.