Arvind Ltd., a supplier of denim to Levi Strauss & Co. and Gap Inc., expects sales to advance 23.5 percent as buyers in the U.S. and India increase spending on clothing, Chairman and Managing Director Sanjay Lalbhai said.
Group sales at the world’s biggest denim maker may climb to 40 billion rupees ($855 million) in the year to March from 32.4 billion rupees a year ago, Lalbhai said in a telephone interview yesterday. Net income will show a “healthy” gain from 499.5 million rupees, he said, without giving a forecast.
India’s economy has grown an average 8.5 percent annually during the past five years, doubling per-capita incomes in the period. Retails sales in the U.S. probably rose in July for the first time as dealers used discounts to stoke consumer spending that accounts for 70 percent of the economy, according to the median estimate of 77 economists surveyed by Bloomberg News.
“The Indian middle class is growing and they have started to spend more money on grooming and on wardrobe,” Lalbhai said. “All apparel retail brands are growing at 30-35 percent a year, which has never happened in India. Things are changing and this trend will continue for another 20 years.”
The company’s shares jumped as much as 6.9 percent to 41.60 rupees and ended at 40.1 rupees in Mumbai. The stock gained 8.4 percent this week, the most since the week ended Oct. 16.
Arvind plans to spend 3 billion rupees this year to expand its yarn-dyed cotton shirting capacity and increase its ability to make denim by 20 million meters to meet demand from the U.S.
The U.S. Commerce Department’s retail sales report is due at 8:30 a.m. in Washington today.
“Things are looking quite good for the textile industry because of the good domestic demand and decent international orders,” said Siddharth Bothra, an analyst with Motilal Oswal Securities Ltd. “Indian mills are also benefiting from rising production cost in China and devaluation of the yuan.”
China’s yuan had its biggest weekly decline in 20 months on speculation the central bank is cooling gains to shield exports amid signs growth in the third-largest economy is slowing.
“Demand is strong for India because China is blinking and their costs are going up,” Arvind’s Lalbhai said. “China is becoming expensive and if its market share goes down because of higher costs, then India will benefit.”
China is the world’s biggest exporter of textile products and may boost shipments 20 percent this year to a record $186 billion, the China Daily newspaper reported on Aug. 11, citing Zhang Xi’an, secretary general of the China Chamber of Commerce for Import & Export of Textiles.
Arvind plans to sell or develop 7 billion rupees of land it owns in cities Ahmedabad and Bangalore in partnership with real- estate developers, Lalbhai said. The money will be used to repay some long-term debts of about 12 billion rupees, he said.