Soft cotton yarn costs to ease clothing prices, says Motilal Oswal

The benefit of softening raw material prices, especially of cotton yarn, will be passed on to customers in September-February this year, said Motilal Oswal in a report. “Although most companies are hesitant to pass on the savings to reduce the average selling price, we expect the retailer/brands to lower the prices in the upcoming Autumn Winter’24 season,” said the brokerage firm in a report dated June 19.

Demand in the clothing segment, which was weak until now, will revive by quarter three of the financial year 2024. This is due to lower inflation, reductions in prices, and the arrival of festive season in India, said the broking firm.

Almost every lifestyle company indicated that the demand was soft across product categories, price ranges, and geographical regions. Low demand had led to stocking of inventories for many retailers. And in order to address the high inventory levels, it is necessary for retail companies to start early with the end-of-season sale, said Motilal Oswal.

The domestic broking firm said that most of the retail brands will be opening Exclusive Brand Outlets (EBO). However, there are no signs of retailers expanding Multi-brand outlets (MBOs).  EBO is an outlet where a single brand operates and MBO is an outlet with many brands under one store.

Also read Rental income of retail malls to increase by 8-10% in FY2024: ICRA

Growth targets

Motilal Oswal further said that retailers are achieving healthy store-level EBITDA of 20 percent or more even in tier 2-3 cities. This is due to with strong store productivity and lower rental costs.

In the listed space, brands such as Killer (Kewal Kiran), Monte Carlo, Cantabil, Indian Terrain, Raymond, and Arvind Fashion have growth targets of 18-20 percent, said the financial services firm.  In the unlisted space, Pepe and Spykar brands have steady growth targets.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.???