Home textile exporters may face weak demand this fiscal: ICRA

New Delhi, Oct 18 (KNN) With an 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, said ICRA on Monday.

After peaking in Q3 FY2022, the turnover of home textile exporters moderated in the quarters ended March 2022 and June 2022. Further, high and increasing raw material and logistic costs resulted in a consistent decline in operating margins since Q2 FY2022, it said.

Rising inflationary concerns, the resultant slowdown in consumer discretionary spending, uncertainty on economic growth outlook and cautious buying by retailers to manage inventories are the primary reasons for declining sales in key export markets.

Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA, said: “As the demand scenario has normalised and inflation is exerting pressure on consumer discretionary spending, ICRA expects home textile companies to report a contraction in turnover in FY2023. In 7M CY2022, US retail sales for furniture and home furnishing stores have grown at a rate of 2 per cent YoY, with a YoY de-growth of 2 per cent reported for the most recent month, viz. July 2022.

Slower-than-expected sales have resulted in higher-than-average inventory levels in recent months (June and July 2022). As a result, ICRA expects retailers to go slow/cautious on buying in the subsequent months to rationalise their inventory levels.

This is corroborated by the slow offtake being experienced by domestic exporters, despite healthy order book trends witnessed till a few months back.”  (KNN Bureau)