Coronavirus in India: Apparel brands stare at 50-60% loss in first quarter of FY21

• Store closures have led to huge inventory pile-up
• Store expansion plans halted
• Spring-summer collection to be spread out over a longer period
• Production of autumn-winter collection stopped

Apparel brand for women, Label Life, has recently launched a work-from-home collection post the outbreak of COVID-19. Log in to its Instagram page, there are pictures of its brand ambassador, Bipasha Basu, flaunting its night-wear collection and the caption talks about how to be comfortable during quarantine and yet look stylish. Preeta Sukhtankar, Founder, Label Life, says that her brand is doing whatever it could to bring in positivity at a time when the mood is sombre due to the outbreak of the deadly COVID-19. She believes that brands which stay connected with their consumers during this tough phase would be the ones who would be able to build stickiness.

However, Sukhtankar as well as her peers in the apparel industry are staring at huge losses due to the COVID lockdown. The analyst community expects apparel companies sales to go down anywhere between 50 per cent and 60 per cent in the first quarter of financial year 2020-21. "A key issue for the apparel sector is that a large part of the spring-summer collection has already arrived for most players. Inventory levels are high, but footfalls have dropped significantly. In certain cases the drop is as high as 80-100 per cent," points out Rishav Jain, Senior Director and Consumer and Retail sector lead, Alvarez & Marsal.

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In fact, most apparel brands have stopped orders of fall-winter collection as they know that they would end up with excess inventory from the previous collection. "We were expecting 50 per cent sales in April-May and we were expecting it to spike from there on. I don't expect more than 10 per cent sale in April. We have kept put all inventory on hold now. We do have sale inventory from the earlier collection which we will keep for next year," says Lalit Agrawal, MD of value fashion brand, V-Mart.

Kavi Mishra, Managing Director and CEO of House Of Anita Dongre, says that his company has cut down on fall-winter collection production. "We will spread our spring-summer collection over the next few months, as that will help us protect cash flows."

Sukhtankar of Label Life says that the saving grace for her brand is the strategy of launching a new collection every month. "We thankfully don't have too much of inventory as we follow a practice of launching a new collection every month. Our April collection hasn't come yet. However, this month, I am not sure when our products will reach the consumer," she says, referring to the COVID-19 lockdown, due to which brands are unable to do online deliveries.

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Mishra of House Of Anita Dongre, says that the biggest lesson from COVID-19 for apparel brands like his, has been to move to a more flexible supply chain model. "We usually plan our collection for a period of six months, we now need to plan a new collection every two months and have at least 6-7 collections a year. That's how we can manage our inventory more efficiently."

Apparel brands, says Jain of Alvarez & Marsal, are trying all possible ways of generating funds. "Retailers and brands are trying to manage vendor payments cycles, discussing delay in rental payouts with landlords, trying to stop all kinds of frill expenses. Most players are also trying to use this opportunity to rationalise their underperforming stores as well."

Both Agrawal of V-Mart and Misra of House Of Anita Dongre, have confirmed that all their store openings in the coming months have been halted. While the 300-store strong House Of Anita Dongre was planning 10 per cent increase in its store count, V-Mart was planning to open as many as eight stores in the next two months.

While most of the leading apparel brands have promised to pay their store staff for the next 40 days, if the COVID-19 lockdown extends beyond that, they are not sure if they will be able to protect their salaries.

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