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Market Monitor | November 2014

Big brands grow by 9.98 points: CMAI Apparel Index

CMAI's Apparel Index this Quarter (July-Sept Q2 FY 2014-15) clearly sets apart the performance of two sets of brands. First, the ´Big Brands´, those with a turnover of Rs 25 crore and above, and second the ´Smaller Brands´ those with a turnover between Rs 10- 25 crore. While the former scored an impressive growth of 9.98 points, small brands touched a meager 4.24 points. In fact, small brands low growth impacted the Overall Index Value, which recorded an average 7.96 points growth. The Index Value of large brands was highest with 11.65 points amongst the four groups of brands.

High inventories emerged the biggest barrier to growth despite positive consumer sentiment. Players´ inability to manage and control Inventories to make way for fresh merchandise, heavily impacted sales turnover and profit margins.

CMAI's Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps Brands in taking informed business decisions. The Index is analysed on the basis of four parameters: sales turnover, sell through (percentage of fresh stocks sold), number of days of inventory holding and investments (signifying future confidence) in brand development and brand building. This time 105 brands shared their responses on the four parameters. Of these, 9 were ´Giant Brands´ (turnover above Rs 300 crore), 30 Large Brands (turnover Rs 100-300 crore), 29 Mid Brands (turnover Rs 25-100 crore) and 37 Small Brands (turnover Rs 10-25 crore).

Poor inventory control affects profits
Small Brands´ slow growth has impacted the overall Index Value. But what worked for Big Brands is: good growth in sales turnover and a restricted increase in inventory holding. Small brands recorded average growth in sales turnover because of an increase in inventory holding. However, most players have reported growth in the second quarter of fiscal 2014-15 compared to the same quarter last year. Many have indicated an overall a ´Reasonable Growth Quarter´, with few signaling negative performance during the quarter under review.

Most retailers plan their inventories well in advance keeping the demand for a particular product, style and pricing in mind. Old inventory is regulated so that they can quickly make way for fresh merchandise on the racks for the new season. However, the index does reflect that only a few managed their inventories well. Almost 70 per cent respondents said that their Inventory Holding increased, impacting profitability.

Players realise the need to invest
The Apparel Index showcased a tremendous improvement in fresh investments. Almost 86 per cent respondents saying that they increased investments during the quarter, compared to the same quarter previous year. Six per cent respondents indicated that there was an increase in investment of more than 41 per cent; 20 per cent increased investments by 21 to 40 per cent; 60 per cent indicated a rise in of 1 to 20 per cent. While 10 per cent said that their investments remained the same another 4 per cent saw a decrease in their investments.

Among the four parameters, on which players are scaled, the highest growth in value during the second quarter was contributed by Sales Turnover at 5.71 points; Sell Through at 2.34 points, saw a moderate growth. Similarly, with increase of 2.21 points, investments saw moderate growth but a rise in Inventory Holding at 2.31 points acted as a spoil sport, resulting in only mediocre growth on the index value. If players were had managed their inventories well, this number could have been much better thereby pushing up the Index Value.

Sell Through, considered an aspect having a direct impact on profitability proved that the quarter generated more profits than the same quarter of previous year for nearly 77 per cent respondents.

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