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  3. Footwear sector likely to see 10-15% decline in revenues in FY21: ICRA

Footwear sector likely to see 10-15% decline in revenues in FY21: ICRA

07 May 2020 Evaluate

Domestic rating agency ICRA in its latest report has said that India’s footwear sector is likely to witness a 10-15 percent decline in revenues in the current financial year (FY21), on the back of closure of retail outlets coupled with weak consumer sentiment due to ongoing Covid-19 nationwide lockdown.

Rating agency has noted that while volumes would be considerably impacted, a marginal decline in the average selling price (ASP) is also likely due to the expected discounts owing to the companies' inclination to convert the limited footfalls, post Covid-19 into sales to shore up their cash flows while liquidating the inventory. Further, it said factors like the impact on disposable incomes, consumer sentiment, closure of educational institutes, offices, public spaces and drop in movements, will keep the demand for footwear subdued in FY2021. It added that this apart, due to downtrading by consumers, the impact is expected to be higher on the premium segment as against the value segment.

According to the report, the decline in exports, of leather and leather products, was very sharp 37 percent in March 2020. It pointed out that leather footwear accounts for the largest portion of exports of leather products from India, at 39 per cent in FY2019, followed by leather goods at 25 per cent and finished leather at 13 per cent. Owing to this, it said the capex outgo for the year FY2021, both in terms of addition to the manufacturing capacity of plants as well as addition to the retail store network, is likely to be moderated by the footwear companies to preserve cash. 

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