The retail sector is somewhat in the doldrums and a revival still looks some way off with most companies in the sector showing flat to negative growth in sales. The hopes and expectations pinned around the festival season did not fructify into actual sales with discretionary spends remaining subdued.

The third quarter results of the retail companies in the sector across all categories showed that barring a few, most reported subdued sales. “Consumer discretionary results were mixed, partly on festive timings issue, with weakness seen in QSRs (Jubi, Devyani) and select discretionary (Titan, Britannia, D’mart, Havells),” said Jefferies.

Nuvama Institutional Equities said that while it had expected the retail sector to see an improvement in demand during the festive season, “the situation has seen no improvement.”  

“The larger worry now is that there is no specific trigger for demand to revive and it would be a slow return to normalcy,” it added.

Quick Service Restaurants are seeing an overall slowdown in consumption with customers preferring value meals. Westlife Foodworld saw a 9 per cent dip in same store sales growth, Burger King’s growth was a tepid 2.6 per cent, and Devyani International reported weak revenue growth mainly due to declines in its KFC and Pizza Hut franchises. Nuvama Institutional Equities attributed the weak sales in this segment to global geopolitical uncertainties that had an impact on brand perception.

In the apparel segment, except for Trent, most of the other companies had middling to weak performances. Page Industries, which sells Jockey products in India, had flat sales and low volume growth. Aditya Birla Fashion Retail saw a 3 per cent dip in the revenue of Lifestyle Brands, while Pantaloons same store sales growth was in low single digits. Its sales from the e-commerce channels were also on the lower side.

ICICI Securities said that the general slowdown in the sector would influence ABFR’s earnings, as well as an increased competition from offline and online players.

“Discretionary demand remains tepid with a greater impact seen on the value segment as smaller towns continue to remain under pressure,” said Axis Securities.

In the jewelry segment Titan reported a decent double-digit topline growth but the growth was moderated due to the inauspicious Shraadh period falling in the month of October. Its EBITDA came in below street estimates with margins missing forecasts across segments. The company is showing better performance after a weak December, said analysts.

Avenue Supermarts, which operates the D’Mart chain of supermarkets and is a play on consumer sentiments, also saw moderating growth mainly due to slowdown in FMCG demand, lower-than-expected sales in the festival season, and softness in apparel demand. The retailer expects a stabilization in the sales of general merchandise in future quarters.

Related Topics
comment COMMENT NOW