Gold & Silver

Covid-19 to impact Akshaya Tritiya gold jewellery demand

Our Bureau Mumbai | Updated on April 21, 2020

The retail gold jewellery industry has been affected by several factors such as weak consumer demand, amid slowing economic growth, rapid rise in gold prices, faltering rural output, regulatory policy interventions and a cautious lending environment. In this background, the Covid-19 pandemic outbreak and subsequent lockdown ahead of the crucial Akshaya Tritiya season sale will aggregate the problem further.

While all jewellery stores across the country are closed, there has been a supply chain disruption with restrictions on movement of non-essential goods.

While jewellery buying is generally spread throughout the year, it peaks during occasions such as Akshaya Tritiya, wedding and festival seasons as buying gold is considered culturally auspicious, said ICRA.

K Srikumar, Vice President, ICRA, said as the stores are currently non-operational, recovery in demand will likely be slow. Given that jewellery is a non-essential product and consumers typically defer their discretionary spends, jewellery retailers will witness sharp moderation in footfalls over the next few months, he said.

Sales during Akshaya Tritiya, which falls in the last week of this month, will be considerably impacted, he added.

In addition to industry revenues being impacted, relatively stable fixed costs in the form of employee payouts and rentals will affect the earnings profile of the retailers.

Any invocation of force majeure clauses, given the above adverse impact on rental agreements, remains to be seen.

Overall, the recent developments around Covid-19 are credit negative for the gold jewellery retail industry over the near term. ICRA will continue to monitor the developments and take appropriate rating actions, wherever required.

Published on April 21, 2020

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