Thunderstorms and non-seasonal rainfall leading to lower summer temperatures are seen leading to a 25-30 per cent drop in sales for consumer durable categories like air-conditioners and refrigerators.
Consumer durable players are a disappointed lot as the April-June summer quarter generally heralds the highest sales for such categories.
“In April there has been a de-growth of 30 per cent. In May, sales are expected to be flat for categories like ACs due to the thunder showers. Overall, we could be looking at a 25-30 per cent drop in sales this summer compared to last year,” says Kamal Nandi, Business Head & Executive Vice-President, Godrej Consumer Appliances.
In fact, last June, there had been a spurt in sales due to pre-GST sales. But now, besides the weather not being favourable, factors like higher GST rates at 28 per cent and changed ISEER labelling (which has moved up prices by 5-6 per cent) could dampen demand for categories like refrigerators and ACs, which comprise the bulk of the consumer durables category.
“Refrigerator sales too will fall unless temperatures go above 30 degree, as that is when food starts to decay. It is going to be tough to sell refrigerators, which comprise almost 46 per cent of the consumer durables segment,” added Nandi.
Stocks piling up
Dealers indicate that stocks of domestic companies like Voltas and Blue Star have piling up since they started selling from April, unlike MNCs like LG which started the process earlier, in January.
“This could be one of those rare years when the weather has played spoilsport both in the North and the South in the same season. This could result in huge unsold inventories with dealers and is likely to impact FY19 revenues and profitability for all AC and cooler companies. We could be staring at a disappointing summer quarter,” said John Perinchery, analyst at Emkay Global.
LG, which has moved its portfolio to inverter ACs, believes it has held it in better stead this summer. “Customers want to switch to inverter ACs as it helps in lower electricity bills. Dealers have found it difficult to liquidate their stocks of fixed speed ACs,” said Vijay Babu, Business Head, Air Conditioner, LG India.