Enriching lifestyles, the Arvind way

A couple of decades ago there was very little inclination towards brands. People were not that brand conscious like they are at present. Moreover, per capita income was also very low, and the Indian apparel market was very fragmented. But things slowly started changing when the per capita income of people started showing signs of improvement. People started talking about global brands and the mall culture helped the brands to find many a loyal customer in the country.

Behind all these transition and growth in the industry, Arvind stands out right from its beginning in 1931.

“Around 2005 to 2006 is when the per capita income moved from three digit to four digit. For a long time, it was around $650, and it became $1,000 around that period (2005-2006.) The Indian market is a very fragmented and very non-branded. By 2005, we saw a major inflection point when this per capita income changed to $1,000. That really helped the organised branded business to gain momentum,” says J Suresh, MD and CEO of Arvind Lifestyle Brands Limited and Arvind Retail Limited.

Arvind Lifestyle Brands Limited is now a leading branded apparel and accessory platform which brings an expansive unmatched ‘future ready’ bouquet of brands – both homegrown and global.

The company has a growing portfolio of global brands of the likes of Tommy Hilfiger, US Polo, CK, GAP, Nautica, and Sephora as well as its own fashion brand ‘Flying Machine’ and value retail chain brand ‘Unlimited’. In 1980, Arvind Brands added Flying Machine to their list of brands, and the company has been adding new brands to its list.

The momentum started setting in from 2005-2006. “Arrow, say in 2009, only the very senior executives could afford. Then of course the salary level changed and per capita income, and at that point in time many people started affording Arrow. So, the biggest change which happened is shift from unbranded and fragmented business, it’s not that it is completely organised now. Even today, the organised trade is only 30%,” says Suresh.

The retail landscape started changing by 2005 and brands started getting spaces where they can have showrooms. “For example, from our portfolio there’s Tommy Hilfiger, Gant. So, these kinds of brands had a house with the malls coming up. If you take a decade ago, it was not growing that fast,” says the MD.

According to Euromonitor International, Global apparel sales are forecast to rise by $156 billion from 2016 to 2019 and only six countries will account for two-thirds of the forecast global growth, namely China, the US, India, the UK, Russia and Mexico.

In India, apparel retail sales in 2019 will touch $73,205 million, and its cumulative share of total global growth in apparel sales would be 57.7%.

Arvind has been delivering higher growth than the industry. The industry is witnessing around 8% growth. “Last year our growth was around 16%, but if you take over a period of four-five years, our CAGR has been 22% to 25%, which is by far the highest in the industry among the large players. We have been consistently delivering and whatever we have been committing to the stock market in terms of growth and margin improvement we’ve been delivering and that is one of the reasons why as a company, we have taken a call to demerge this business,” informs Suresh.

Arvind Limited will demerge and list both engineering and apparel business. It is expected to be completed by September.

“This (demerger) is more to do with the investors because what happens is if you are a conglomerate, some investors may be interested only in textile part of the business. They may not invest in Arvind because they may think that there is a lot of brands. Similarly, there may be investors interested in other businesses and they may not be interested in a B2B textile business. So, we’ll not attract those kind of investors. Now, I think it’s available to both. Someone who is interested in textile, can invest in textile business, so it’s more to do with the investors,” he says.

According to Sharekhan, demerger of businesses such as B&R and Anup Engineering into separate verticals would enhance shareholders’ value in the near future. “FY2018 performance of Arvind was impacted by lower textile business margins (largely affected by rupee appreciation and reduced duty drawback rates) and implementation of GST affecting the branded and retail business. Performance is expected to improve in FY2019 with double-digit revenue growth and margin expansion in key business verticals,” Sharekhan said.

The best portfolio of brands

One of the key drivers of Arvind’s performance is its portfolio. “I think portfolio is driving this growth. If you take men’s casual and denim segment as a fastest growing segment, we are a dominant player, we are number one player in that segment and that’s the segment which has been growing. So, we being the number one player in that segment and in a way shaping that segment, we get the advantage of that growth. The other one is that we have looked at kidswear as an opportunity, so there again in the mass premium space, we have become number one now,” says Suresh.

The overall market of kidswear is around Rs 75,000 crore. “Of Rs 75,000 crore, the branded market is still very small. Kidswear is largely dominated by local brands. So the branded market in kidswear will be around Rs 2,000 to Rs 3,000 crore. About 30% of the apparel market, which is Rs 2,50,000 crore is actually kidswear,” he adds.

Apart from kidswear, Arvind also sees growth in innerwear. In 2013, Arvind Brands added Hanes and Wonderbra to the list of its brands. “Now, we have introduced US Polo innerwear, which has actually taken off much faster,” says Suresh.

Arvind is still very men dominated business. About 72% of its sales come in menswear, 11% comes from women and 8% from kidswear and about 5% from innerwear.

In FY19, it wants to be a Rs 5,000 crore company. “And then we should be a Rs 9,000 crore company by FY 22. So, that is the commitment and we are on course to deliver that,” he says, adding 11% of its sales comes through online. Arvind is focused on online right from the beginning.

The company also targets Tier-III and IV market as well. “We have been targeting these markets for quite sometime. In fact, brands like Flying Machine, US Polo and Arrow, all are available in many markets in Tier-III. So, we now have our presence across if you take all the brands put together around 200 towns,” says Suresh.

In 2016, Arvind Fashion Brands tied up with cricketer Sachin Tendulkar to launch True Blue. Right now, there are six True Blue stores and 100 points of sale. In the same year, Arvind launched Nnnow.com, a one-stop shopping destination for trendsetters across the country. In 2017, it launched its own Ready-To-Wear brand.

“There are certain categories where we want to be number one. In casual denim, we are number one, kids we want to be number one. We want to be a significant player in the value retail, we may not be number one, but at least among the top four and we want to be among the top 3 in innerwear. We don’t have that kind of ambition for women’s wear because there are too many players and that we have to start from zero,” he concludes.

Arvind is well on its mission - driven by collective excitement and resolve to be the market leader in chosen market segments by 2020.