Fashion retailers on Monday sought government support to ease fund flow and to compensate for essential expenses like vendor payments, rents and salaries, saying many players stare at insolvency and recovery from COVID-19 will be a long and arduous journey and with millions of jobs at risk. As a result of the mandatory closure of retail stores across India, the industry is facing an imminent and massive financial crisis with major disruption, they said.
“With the ongoing COVID-19 pandemic, the entire retail industry is witnessing uncertain and challenging times more than ever. Getting back on track will be a long and arduous journey as the way forward looks fluid with millions of jobs at risk,” Sundeep Chugh, Managing Director and CEO, Benetton India told PTI.
According to a PTI report: Seeking support from the government, he said the aid will not only help the sector survive but will in turn save many families that are supported by the retail employed workforce.
Fashion retailers are facing imminent financial crisis and insolvency in view of high cost of goods, fixed rentals, employee costs, etc, Gautam added.
He further told PTI that the government needs to come up with a “support package for the industry to ease fund flow and to compensate for essential expenses like vendor payments, rents and salaries”.
“Fashion retail supports a lot of small and medium garment factories which are labour intensive. A relief package will help us prioritise their daily wages and ensure these companies and their people can survive these tough times. This is required urgently as the market recovery is going to be very slow and it’ll help all of us remain afloat,” Gautam was quoted by PTI as saying.
Dhruv Bogra, Country Manager, Forever New said that due to mandatory closure of retail Stores across India, the industry is facing an imminent and massive financial crisis and major disruption. Millions of jobs in retail are at risk as the impact will be felt for many months.
Under the current circumstances, the industry will take at least six months to get back on track in terms of cash inflows but there is a question mark on how many companies can actually survive this downfall for the next six months, he said.
The losses over six months can cross a figure of about US$ 700 billion based on the US$ 30 billion loss for the fortnight and the recovery period of these losses can be over a decade for some business, Vakharia added.
Last moth, IIFL Securities in a report had cautioned that the lockdown would force fashion and apparel industry to moderate launches and resort to heavy discounted sales to liquidate the old inventory.
“We expect apparel players to moderate launches in this season and focus on reducing inventory obsolescence risk,” said the IIFL report.
Cash flow concerns are likely to emerge for smaller peers, as the period of reduced operations elongate and this is likely to result in higher discounting as smaller peers rush to liquidate inventory during the recovery, it added.
The focus for larger players is likely to be on ensuring that supply chain is ready with new-season launches so as to benefit from potential demand recovery in the second half of the current fiscal, the report said.