Many lifestyle companies are seeing a decline in demand across various product categories, as reported by Motilal Oswal Financial Services.
Stores have seen the clearance of accumulated old inventories, while companies have launched new summer collections.
January showed a decrease in demand, but February improved somewhat due to the wedding season and the prolonged winter. Additionally, management anticipates a stronger March, influenced by Holi and Eid festivities, as well as election expenditures. End-of-season sales (EOSS) remained consistent with the previous year during the same period, according to the brokerage. Ethnic companies are facing a subdued demand, as the quarter has fewer weddings despite more available wedding dates. Metro and Tier 1 cities/towns are still outperforming Tier 2 and Tier 3 locations.
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Despite the challenging environment, companies are still expanding their stores at a rate of 10-15%. Historically, the last quarter is typically strong for retailers in terms of store growth.
“We expect all the companies in our coverage to continue adding stores. However, V-Mart is likely to shut down some of its unprofitable stores, possibly leading to a net reduction for the company in 4QFY24,” stated Motilal Oswal Financial Services.
Raw material costs have largely stabilized, and some companies have already passed these costs onto customers through price reductions in previous quarters. In the current quarter, we anticipate minimal price reductions by companies. With the clearance of old accumulated inventories, companies have launched new summer collections. The combined advantages of price reductions and raw material cost moderation could bolster demand recovery over the next two to three quarters, according to the brokerage.
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