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This article was first published 1 year ago  » Business » After strong run, retail demand feels the fatigue

After strong run, retail demand feels the fatigue

By Sharleen D'souza
April 25, 2023 15:26 IST
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The retail industry witnessed robust top-line growth for the greater part of the previous financial year, but demand has started to show signs of fatigue seen in the January-March quarter (fourth quarter, or Q4) of 2022-23 (FY23), especially in the apparel and innerwear segments.


Photograph: Punit Paranjpe/Reuters

Jewellery, however, has managed to hold on to demand in the quarter.

"In the discretionary space, demand moderation in urban markets is expected to impact the quick-service restaurant and apparel categories the most, while paint, luggage, and jewellery should see resilient growth,” Systematic Institutional Equities observed in its preview of the sector.


In its quarterly update, Titan Company said its revenues in Q4FY23 grew 25 per cent year-on-year (YoY), aided by higher growth contributions from watches and wearables and emerging businesses. Also, its jewellery division grew 23 per cent YoY.

“The base quarter of Q4 of 2021-22 (FY22) carried the adverse impacts of partial lockdowns during the Omicron wave and weak consumer sentiment caused by a fragile geopolitical situation due to the onset of the Russia-Ukraine war,” it said.

The jewellery business’ performance was largely led by buyer growth — both in new and repeated, coupled with an increase in ticket size.  ICICIdirect also noted the same in its results preview note on the retail sector.

It said in its report that demand for the lifestyle segment had started to wane during January-February as pent-up demand for discretionary spending reduced.

“Also, owing to higher inflation, consumers’ share of wallet towards discretionary appears to have declined (mainly in non-tier I cities).

"We expect Titan, Trent to buck the current trend owing to continued momentum in network expansion,” the brokerage said in its report.

The brokerage also said that value fashion continues to be the most impacted, with a softer performance expected in V-Mart and Pantaloons (from Aditya Birla Fashion and Retail, or ABFRL).

ICICIdirect expects its retail coverage universe to report revenue growth of 21 per cent in Q4FY23 (down 14 per cent quarter-on-quarter).

It also expects earnings before interest, tax, depreciation, and amortisation margins to remain under pressure, mainly on account of higher operating expenses on the back of strong store openings and investments in marketing spending.

IIFL Securities, on the other hand, expects top-line growth to be healthy for apparel retailers YoY at 28 per cent, driven by Trent, which it expects to be 63 per cent up, compared with last year. It also expects top-line growth of over 28 per cent for V-Mart, Shoppers Stop, and Go Fashion on a low base due to the pandemic.

DMart also said in its quarterly update that its standalone revenue from operations stood at Rs10,337.12 crore.

This is 20 per cent higher, compared with the same quarter last year.

IIFL Securities said in its report that ABFRL is one of the largest players in the Indian apparel sector, investing in new growth vectors, while the core business remains healthy.

Nirmal Bang said in its report on V-Mart, “We expect V-Mart’s Q4FY23 revenue to grow by 31.3 per cent YoY, on the back of a good wedding season, spillover of winter demand, and volume pick-up riding on price reversals taken by the company in view of cooling raw material inflation.”

It also said that Titan continues to deliver sales growth in the high teens, given that the volume per store is still below the long-term average.

ICICIdirect said on the jewellery retailer that January and February saw a continuance of strong consumer purchase intent visible during the festival season.

However, a sudden spike in gold prices led to a relative softening of demand in March.

The brokerage expects Bata India to post 20 per cent YoY revenue growth in Q4FY23 on a low base as some part of Q4FY22 was impacted by the third wave of the pandemic.

“Product focus remains on casualisation as Bata India is expanding the distribution footprint for its sneaker portfolio,” it said.

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Sharleen D'souza
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