The domestic textile market will remain sluggish in 2020

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Monthly revenue at Arvind Ltd during COVID containment

Arvind Ltd, one of India’s largest textile and clothing manufacturers, said its revenue fell about 37% in August from a year earlier due to the impact of the shutdown of the coronavirus and he expects the domestic market to remain subdued until early 2021.

Revenue in August was Rs 414 cr in August, compared to the average of Rs 611 cr for January and February – before the lockdown was imposed.

Income began to decline in March, when they recorded sales of Rs 417 cr, impacted by the lockdown. Monthly income then fell to Rs 52 cr in April and to Rs 201 cr in May due to the foreclosure, Arvind said.

DIVISIONS

Monthly volumes of the textile division

As export volumes rebounded faster, the denim division experienced a faster recovery than the woven business.

Monthly sales were only 10% lower than yesteryear levels in the denim division in August, while they were still down 38% year-on-year in the woven division (see left side of graph below). above).

Activity continued to be quite strongly impacted in the clothing division, where volumes fell 37% year-on-year in August, a slight improvement compared to the 41% decline observed in July.

In terms of sales, denim was down 21% in August, while woven was down 46% and clothing was down 26% (see graph below).

Monthly revenues of the different divisions

Cash profit margins (EBITDA), which had fallen to 8.9% of revenue in May, rebounded to pre-COVID levels of 12.6% in the clothing division and 11.1% for the whole business in August, he added.

2020 WASHED

Samir Agrawal, chief commercial officer of Arvind Composites, pointed out that the company had been hit hard by the lockdown as it was selling a discretionary purchasing item – clothing.

Besides the need to “save money” which hampered discretionary shopping, clothing sales also suffered from consumers’ fear of entering air-conditioned stores.

“COVID-19 and the associated lockdown have had a profound impact on most businesses in virtually every region of the world,” Agrawal said. “Arvind’s core business, consumer discretionary, has been hit hard. The domestic market is still quite difficult, and we are seeing a recovery in demand of only around 30 to 40% in various segments.

“In addition, much of the recovery in demand in India is in rural and semi-urban areas, which traditionally buy valuable goods. Urban India has yet to recover clothing consumption substantially, which is also reflected in the results of the country’s major clothing brands and retailers, ”he added.

Jayesh Shah, chief financial officer, said it was likely that major clothing retailers would likely not start taking stock from manufacturers like Arvind Ltd until January-March 2021, after they liquidated their existing inventory during the season. of Diwali (October-November).

“There is a challenge both for the end consumer like B2C companies where we supply fabrics or clothing to brand name clothing companies and retailers where sales have been badly affected. Likewise, our fabric retail is also affected because of this, so the products that we sold in the last quarter of the fourth quarter or the last quarter of the previous fiscal year are still not really sold by them because most of the time so far has been in lockdown, so they are holding stocks. They postponed the purchases.

“We think most brand name clothing and retailers won’t buy, they’ll skip a purchase for a season and I think they’ll start buying in the fourth quarter, so we’ll see a gradual reduction in inventory levels from our customers over the next three to six months, especially in Quarter 3 when it’s Diwali festival season, where we believe a lot of inventory will be kicked out. They won’t buy anything new for the next four to five months, so domestic market demand will remain moderate for domestic consumption, ”he said.

The company also said it was too early to see an impact from attempts by international clothing brands to branch out from China into markets such as Bangladesh and India.

“Most of these big customers are reviewing their entire supply chain and as a country risk mitigation strategy they definitely see India as one of the destinations. However, what happens is that at this point these customers are planning their Fall 21 assortments. So, sure, there is a flow of inquiries, but it will result in real ones. business in the fourth quarter of this fiscal year. [Jan-Mar 2021]”said Ashish Kumar, CEO of Apparel and Advanced Materials at Arvind Ltd.


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