With increase in material and logistic costs, home textile exporters are likely to witness a double-digit contraction in turnover as well as moderation in margins in 2022-23, according to a report.
After peaking in the third quarter of FY22, the turnover of home textile exporters moderated in the quarters ended March 2022 and June 2022 amid a slowdown in demand, a report by rating agency Icra said.
Further, high and increasing raw material and logistic costs resulted in a consistent decline in operating margins since the second quarter of FY22, it added.
The report noted that rising inflationary concerns, the resultant slowdown in consumer discretionary spending, uncertainty on economic growth outlook and cautious buying by retailers to manage inventories are affecting sales in key export markets.
Icra expects the turnover of home textile exporters to further contract in the quarter ended September 2022, with muted sales in the December quarter as well.
Overall, Icra expects a double-digit contraction in turnover as well as moderation in margins for home textile exporters in FY23, following all-time high sales and profits in FY22.
“As the demand scenario has normalised and inflation is exerting pressure on consumer discretionary spending, we expect home textile companies to report a contraction in turnover in FY23.
“In seven months of CY2022, US retail sales for furniture and home furnishing stores have grown at a rate of 2 per cent year-on-year, with a YoY de-growth of 2 per cent reported for the most recent month, viz. July 2022,” Icra Senior Vice-President and Group Head of Corporate Sector Ratings Jayanta Roy said.
Slower-than-expected sales have resulted in higher-than-average inventory levels in recent months (June and July 2022), he added.
(With PTI inputs)