Apparel Retail Growth To Moderate To 12-13 Per Cent In FY27 As Consumers Diversify Spending: Crisil Report
· Free Press Journal
Mumbai, September 10, 2026: India's organised apparel retail sector is projected to grow 12-13 per cent this fiscal, moderating from the 15 per cent growth recorded in the previous year, as consumers increasingly spread discretionary spending across categories beyond clothing, a report said on Thursday.
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Revenue growth has been broadly steady so far in the high single digits between April and August 2026, but has largely been driven by the value-fashion segment, Crisil Ratings said in the report.
Organised apparel retail sector's revenue growth is expected to remain healthy this fiscal, growing 12-13 per cent, though slightly lower than the 15 per cent recorded last fiscal, amid a broader diversification of consumer discretionary spending, it added.
Value Fashion Drives Growth
However, the growth is expected to be supported by strong demand for value fashion, expansion of organised retail beyond big cities and continued preference for branded apparel.
Higher cotton prices and rising operating costs are likely to squeeze margins, as intense competition may limit retailers' ability to pass on higher costs to consumers.
Operating margins are expected to fall by about 100 basis points to 14 per cent this fiscal.
However, credit profiles are likely to remain stable because retailers are pursuing calibrated expansion strategies in larger cities that do not strain balance sheets, and expansion in smaller cities requires a relatively lower capital outlay.
Festive Season Holds Key
The festive season, which has recently commenced, will be crucial to the sector's growth outlook because festive spending typically accounts for nearly 35 per cent of annual apparel sales.
"Value fashion has emerged as the key growth driver for organised retailers, growing more than twice as fast as the other segments over the past three fiscal years and increasing its share of revenue."
"The shift reflects an increasing share of aspirational consumption by price-conscious consumers, wider choice at lower price points and increasing penetration into smaller cities. While value fashion will continue to support volume growth, the rising share of lower-priced apparel is expected to moderate organised apparel retail revenue growth to 12-13 per cent this fiscal," Crisil Ratings Senior Director Anuj Sethi said.
Omnichannel Strategies Gain Importance
Changing consumer shopping patterns are also increasing the importance of omnichannel strategies as shoppers move seamlessly between online and offline channels; brands are investing in digital capabilities to strengthen customer engagement and attract new customers.
Even so, physical stores continue to account for the majority of apparel sales and remain the primary growth driver.
Retailers are, therefore, expanding their footprint in underpenetrated tier-II and III cities, with value-fashion players leading store additions.
As these networks expand, revenue per square foot and same-store sales growth will remain key indicators of how effectively new stores are translating into revenue growth.
"Revenue per square foot has remained largely flat at around Rs 11,000 over the past three fiscal years and is unlikely to improve this fiscal year meaningfully because same-store sales growth remains subdued. Growth continues to be driven primarily by new store additions and the increasing share of the value-fashion segment."
"With rising cotton prices and elevated operating costs likely to lower operating margins somewhat to around 14 per cent this fiscal, maintaining the balance between growth and profitability will remain critical," Crisil Ratings Director Poonam Upadhyay added.
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Capital expenditure is expected to remain around Rs 2,500 crore this fiscal, broadly in line with last fiscal, as retailers expand into newer and smaller cities.
Crisil Ratings report added that key factors to watch will be the strength of festive-season demand, retailers' ability to sustain momentum in value fashion and the trajectory of cotton prices.
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