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Jewellery retailers are likely to report lower revenue growth with a possible decline in volumes this year compared to 2012, along with slightly lower margins, according to India Ratings.
India Ratings has given a stable to negative outlook for domestic Gems and Jewellery (G&J) retailers for 2013, the rating agency said in a recent report.
Domestic G&J retailers’ revenue may grow in the range of 15-25 per cent in 2013 from around 40 per cent in 2012, the report said.
Indian consumers, when purchasing jewellery for cosmetic purpose, focus more on its value than volume, it said adding that traditionally gold jewellery was purchased for investment as well as cosmetic purposes.
However, rising gold prices as well as easily available gold investment may have somewhat changed this behaviour, it said.
The report further said the sector’s margins may reduce in 2013, and domestic retailers on the store expansion spree may experience an increase in operating costs without a commensurate increase in revenue.
Domestic jewellery manufacturers are generally able to pass on increases in gold prices to retail customers, which support their operating margins, it explained adding sharp increases and volatility in commodity costs result in a time lag before being fully reflected in retail prices.
Any further increase in gold prices would lead to deferment of jewellery purchases and thus companies would face lower sales.
Several jewellers are trying to attract customers by providing discounts on making charges of jewellery, it added.
However, major domestic retail jewellers are expanding in tier II and tier III cities, with some of them financing the expansion by equity capital raised from initial public offerings, may benefit from such expansion at the expense of small players.
An observable trend is smaller players becoming franchisees of the more established brands, it added.
India Ratings expects overall G&J growth to be in the range of 4-9 per cent year-on-year. The growth of finished products is likely to be driven by the likely improvement in major export markets.
Jewellery exports to the US may show muted growth this year or at least be maintained at the 2012 levels.
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