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 * News
 * 3 min read


CONSUMER COMPANIES SLASH JUNE OUTPUT TO CLEAR INVENTORY

Most chief executives have predicted a demand revival by Diwali and, based on
inventory clearance by then, indicated to manufacturers festive season orders
higher than last year.

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 * Writankar Mukherjee & Sagar Malviya ,
 * ET Bureau

 * Updated On Jun 22, 2023 at 07:55 AM IST
   



Companies in segments such as apparel and fashion, electronics and smartphones
have chosen to steeply reduce production and supplies by up to 50% this month
because of low demand and high unsold inventory, which they want to clear before
the festive season.

Most chief executives have predicted a demand revival by Diwali and, based on
inventory clearance by then, indicated to manufacturers festive season orders
higher than last year.

Companies said inventory levels are currently at record highs due to
slower-than-expected demand in the past six to seven months.

Godrej Appliances business head Kamal Nandi said that since summer season sales
of air-conditioners and refrigerators failed to pick up this year, production
was slashed up to 50% in the industry, compared to the earlier planned cut of
30%. “Most companies were running production at peak capacity till last month,
hoping demand will pick up, which didn't happen,” he said.


Advt



“Festive season production will also start late — from around August-September
since Diwali is late this year — to allow the inventory to be sold out,” said
Nandi of Godrej Appliances.

Pardeep Jain, managing director of Jaina Group — which manufactures smartphones
for several companies, besides retailing its own Karbonn brand — said the mobile
phone market was down 30% and companies have adjusted production accordingly.

Apparel brands, retailers and manufacturers too said stocks have piled up.

Aditya Birla Fashion and Retail Ltd managing director Ashish Dikshit told
analysts recently that inventory has been high as sales were below expectations,
and that ABFRL has curtailed some purchases for fresh inventory. He said the
lower end of the market was more affected till recently but it now “appears that
it is a more widespread sort of slowdown.”



Page Industries, which sells the Jockey brand, told analysts recently that
inventory was at an all-time high of 120 days, against 92 days last year.
Managing director VS Ganesh said the company has tuned its “supply chain in such
a way that going forward, supplies are going to be lower than what we are going
to sell so we can bring the inventory levels down.”

Downward Trend
Consumers started reducing non-essential spending such as that on apparel,
lifestyle products, electronics and dining out since Diwali last year due to
inflation, increase in interest rates, job losses in some sectors such as
startups and IT, and an overall slowdown in the economy.


Advt


Companies had not seen such a sudden slowdown that piled up inventory. Summer in
the North and several other parts of the country was also muted this year, which
further impacted sales of seasonal products.

Retailers have planned earlier ‘end of season’ sales to clear stock.

“There has been a demand constraint and we have tightened our buying
accordingly. In select categories, such as denims, we are cutting orders by
10%,” said Satyen Momaya, chief executive of French apparel brand Celio. “We
also have a 10-15% ‘open to order’ strategy, which we generally implement after
assessing the market. This time, we don’t think we will opt for it.”

ICRA has said revenue growth of listed retail entities will moderate to 10% this
fiscal, after reporting a stellar 51% year-on-year growth in FY23 due to demand
pressures.

Market researcher IDC India, in a recent report, said the Indian smartphone
market declined by 16% year-on-year in January-March, while the computer market
dropped a steeper 30%. IDC said inventory levels are high, and it estimates flat
growth for the smartphone market this calendar year.

However, all leading listed consumer-facing companies have forecast a revival in
discretionary spending by Diwali this year, led by improvement in the inflation
and macroeconomic scenario. Companies are also placing higher festive orders
than last year.

   
 * By Writankar Mukherjee & Sagar Malviya ,
 * ET Bureau

   
 * Published On Jun 22, 2023 at 07:54 AM IST
   


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