Credit rating agency Crisil on Friday said that revenue of organised apparel retail sector is set to plummet by as much as 30-35 per cent this fiscal due to the outbreak of COVID-19.
Accordingly, temporary store closures, restricted mobility and low income visibility for consumers have been cited by the agency as reasons for the expected plunge in sector’s revenue.
“While operating profitability is expected to be impacted by 200 basis points (bps), the absolute fall in operating profits will be much sharper, necessitating additional funding, mainly debt, by firms to make up for cash flow shortfalls,” Crisil said.
“This will affect credit metrics.”
The analysis, based on a sample of 60 Crisil-rated apparel retailers, considers staggered easing of the lockdown, and majority of stores reopening in June, though demand is expected to recover to pre-lockdown levels only during the October-December festive season.
“Pent up demand, as well as the behaviour of consumers post lifting of lockdown, will have a bearing on the pace of recovery,” the agency said.