“New launches are completely on hold. Since Covid-19 pandemic came into light and nationwide lockdown started, there has been no launches of new brand or collection. Barring a few in January - February this year, new launches of brands and collections are deferred,” said Ujjwal Lahoti, managing director, Lahoti Overseas, one of India’s largest kidswear brands producers and retailers.
Apparel and clothing retailers used to come out with 'end of season sale' with branded products sale at heavy discounted price around this time every year. This year, however, the 'end of season sale' has disappeared as many retailers are struggling for survival amid high rentals and other fixed costs and extremely weak sales.
"Enthusiasm is gone. Not only new launches but opening up of new pipeline stores too have been deferred. Earlier, we used to operate some stores just for location advantage even if they were non-profitable. Now, business sentiment has completely changed with retailers' focus on break even or profit earning before expansion into new products or location," said Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI).
With slower than initially envisaged recovery in sales of apparels and home textiles, domestic retailers are deferring new season launches to October - November 2020, which is trickling down to lower offtake for fabrics and yarn.
In contrast, better demand for downstream products in some of the international markets, together with competitive prices for Indian cotton, and therefore, cotton yarn, are resulting in a relatively better export demand for India’s cotton yarn. However, the export demand is not adequate to compensate the sector for the loss in demand in the domestic market, which consumes nearly 70% of the yarn produced in the country.
“Many retailers are aiming new launches to begin during Dussehra and Diwali season. But, the senario looks gloomy this year,” said Mehta.
Meanwhile, the national lockdown implemented in India from March 25, 2020 onwards, to contain the spread of the virus, was officially lifted from the second week of June 2020 with certain guidelines and restrictions. However, even after a month, the operations for spinners have not yet fully ramped up.
This is despite the fact that several companies
outside the containment zones had already commenced operations in April and May 2020, after taking requisite approvals from the concerned authorities. Capacity utilisation for most players across the sector is estimated to have averaged at between 30 and 40 per cent in April - June quarter 2020 (Q1, FY2021).
"The main reason for the slow recovery has been the sluggishness in demand in the downstream segments of fabrics and apparels. The trend has been weaker in the domestic market, where consumer-discretionary spending and consumer footfalls in markets remains abysmal, particularly in metros and tier-I markets. Yarn, being an intermediate product, is resultantly facing a ripple effect of the contraction in demand in the downstream segments," said Jayanta Roy, Senior Vice President, Icra Ratings.
Apart from Covid-19 related concerns, another cause for worry for the Indian spinning sector has been the flare-up witnessed in geo-political tensions between India and China in recent months.