Retail companies are expected to experience muted top-line growth in the quarter, as demand continued to remain soft during the July-September period. Additionally, the delay in the festival season this year compared to the previous year has shifted demand into the third quarter.
“The moderation in raw material pricing should alleviate pressure on gross margins. However, decreased same-store sales growth could negatively impact store productivity and lead to operating deleverage,” said Motilal Oswal in its preview report on the sector.
Nevertheless, jewellery and watchmaker Titan Company is expected to buck the trend, thanks to robust sales growth driven by studded activations, according to brokerage reports.
It also said that the overall revenue growth of 18.8 per cent for second quarter (Q2) of 2023-24 (FY24) is anticipated to be primarily driven by store additions, as same-store sales have remained negative due to weaker demand and a higher base.
“Despite Adhik Maas (deemed inauspicious by Hindus) in Q2, we expect Titan Company to report robust sales growth of 18 per cent (excluding bullion), on the back of studded promotions in the quarter. This will also be supported by rapid store additions, leading to continued new buyer growth,” IIFL Securities said in its preview report on the retail sector.
In the apparel sector, low wedding dates, combined with persistent weak consumption patterns that were observed in the April-June quarter, will play spoilsport for companies.
“Trent continues to be an outlier; we expect 44 per cent sales growth, driven primarily by store additions in Zudio. We forecast aggregate revenue growth of 13.4 per cent (5 per cent excluding Trent),” stated the domestic brokerage firm in its report.
Motilal Oswal also expects the slowdown to persist in both premium and value fashion categories. Shoppers Stop and V-Mart have indicated a single-digit decline in same-store sales.
Nirmal Bang also mentioned in its report that the September quarter is seasonally the weakest quarter for the industry, and this year the weakness is amplified due to festivals being pushed into the October-December quarter.
“Bata and V-Mart — the two retail companies under coverage — will show modest growth and likely not achieve the volumes attained in Q2 of 2019-20, especially V-Mart,” the brokerage noted.
It also added, “The pre-announced revenue growth (year-on-year) for V-Mart in Q2FY24 — which was 3 per cent below our expectation — was driven by retail area expansion while like-to-like sales were down in mid-single digits.”
Motilal Oswal expects Aditya Birla Fashion and Retail to see moderate revenue growth of 7 per cent compared to last year, as revenue growth for Pantaloons and Madura is expected to remain weak due to demand pressures.
IIFL Securities expects Vedant Fashions (Manyavar) to report the weakest performance in the coverage, with a sales decline of 9 per cent during the quarter.
