Ind-Ra expects sector revenues to grow around 9 per cent year on year (YoY) in FY26 and 10.5 per cent YoY in FY27 following uneven and subdued growth through FY24 and early FY25; the growth in FY25 was 8 per cent YoY.
Ind-Ra expects India’s apparel retail sector revenues to grow around 9 per cent YoY in FY26 and 10.5 per cent YoY in FY27 following uneven and subdued growth through FY24 and early FY25.
Premium, branded and ethnic players are expected to see steadier, high single-digit growth trends.
Ind-Ra feels value retailers will outperform other segments within apparel, with robust revenue growth.
Ind-Ra feels value retailers will outperform other segments within apparel, with robust revenue growth through healthy same store sales growth and rapid store additions, albeit at a lower profitability.
Healthy growth in operating profit coupled with strong inventory turns is expected to result in value retailers demonstrating stronger-than-industry return indicators and credit metrics.
Premium, branded and ethnic players are expected to see steadier, high single-digit growth trends as consumer confidence rebuilds with a better spread out wedding calendar than in FY26 and early signs of normalisation seen in the first nine months of FY26.
Listed apparel retail players from Ind-Ra’s sample set reported revenue growth of around 10 per cent YoY in these nine months as the government’s consumption push through lower taxation and mild inflation resulted in higher disposable income and improved affordability.
The operating profit margins also improved to 15.6 per cent in the nine months compared to 15.2 per cent in FY25 due to various cost optimisation measures adopted by companies.
Organised retailers are pivoting from aggressive expansion to productivity-led growth. After elevated store additions in FY24-FY25, Indian apparel retailers are moderating store roll-outs, sharpening site selection, right-sizing formats and targeting faster ramp-ups of recent openings, with omni-channel execution and scalable franchise models enhancing reach and capital efficiency, Ins-Ra said in a press note.
It expects store additions to ease to nearly 7 per cent YoY in FY26 and 6 per cent YoY in FY27, even as retail area continues to rise by 9 per cent YoY in FY26 and by 9.5 per cent YoY in FY27, reflecting larger average store sizes and assortments designed to lift footfalls, average transaction values and sales per square foot.
Value and luxury segments are set to lead sector performance. Value formats benefit from GST rationalisation at lower price points, improved affordability, and rising private-label penetration, while luxury gains from a widening affluent base and deeper global-brand access.
Fast fashion continues to capture Gen-Z-led, content-driven demand. Casual and athleisure remain ahead of ethnic-casual and formal wear, in line with comfort- and lifestyle-led dressing trends.
Ind-Ra expects profitability to improve gradually as cost optimisation, better sourcing/mix, disciplined advertising and marketing promotions, and operating leverage offset residual pressures from expansion and fixed costs.
The working capital cycle for value retailers is likely to improve YoY in FY27, due to higher inventory turns and improved store level operating metrics.
Overall, as the consumption upturn broadens and retailers prioritise productivity over pace, Ind-Ra expects a stable, sustainable improvement in revenues and operating metrics for organised apparel retailers over FY26–FY27.
The luxury segment is also expected to benefit from an increase in target customer segment through widening affluent base and deeper global-brand access.
Mid-premium and several incumbent retailers witnessed slower growth in FY25, due to entry price mix-shifts and loss of market share to value retailers. This, coupled with investments in store format revamps, has stressed their margin profiles. Profitability pressures and a dip in inventory turns have slightly weakened credit metrics for segment players.
Fibre2Fashion News Desk (DS)
