India’s retail sector is expected to deliver a mixed performance in Q2 FY25, as per the Centrum report.
Strong͏͏ Growth͏͏ in͏͏ Value Retail and Jewellery:
While͏͏ sectors͏͏ such͏͏ as͏͏ value͏͏ retail,͏͏ jewellery,͏͏ and͏͏ luggage͏͏ are͏͏ expected͏͏ to͏͏ see͏͏ strong͏͏ growth,͏͏ the͏͏ quick͏͏ service͏͏ restaurant͏͏ (QSR)͏͏ sector͏͏ is͏͏ grappling͏͏ with͏͏ significant͏͏ demand͏͏ challenges͏͏ due͏͏ to͏͏ heavy͏͏ rainfall͏͏ and͏͏ a͏͏ decline͏͏ in͏͏ out-of-home͏͏ consumption.
The͏͏ value͏͏ apparel͏͏ retail͏͏ segment͏͏ is͏͏ anticipated͏͏ to͏͏ achieve͏͏ a͏͏ 15͏͏ percent͏͏ same-store͏͏ sales͏͏ growth͏͏ (SSSG),͏͏ propelled͏͏ by͏͏ easing͏͏ inflation͏͏ and͏͏ a͏͏ resurgence͏͏ in͏͏ rural͏͏ demand.
Continue͏͏ Exploring:͏͏ India’s͏͏ apparel͏͏ retail industry͏͏ to͏͏ continue͏͏ growing͏͏ with͏͏ rising͏͏ incomes͏͏ and͏͏ demand͏͏ for͏͏ affordable͏͏ fashion:͏͏ Centrum
The͏͏ jewellery͏͏ segment͏͏ is͏͏ anticipated͏͏ to͏͏ experience͏͏ a͏͏ solid͏͏ 15͏͏ percent͏͏ same-store͏͏ sales͏͏ growth͏͏ (SSSG),͏͏ mainly͏͏ attributed͏͏ to͏͏ the͏͏ cut͏͏ in͏͏ customs͏͏ duty͏͏ from͏͏ 15͏͏ percent͏͏ to͏͏ 6͏͏ percent.
Impact͏͏ of͏͏ Seasonal͏͏ Factors͏͏ on͏͏ Overall͏͏ Performance:
However,͏͏ the͏͏ overall͏͏ performance͏͏ of͏͏ the͏͏ sector͏͏ was͏͏ affected͏͏ by͏͏ the͏͏ fewer͏͏ wedding͏͏ days͏͏ during͏͏ the͏͏ quarter.͏͏ Despite͏͏ this,͏͏ premiumization͏͏ and͏͏ strong͏͏ consumer͏͏ demand͏͏ have͏͏ driven͏͏ healthy͏͏ foot͏͏ traffic.
However,͏͏ fluctuations͏͏ in͏͏ gold͏͏ prices͏͏ and͏͏ aggressive͏͏ promotional͏͏ strategies͏͏ are͏͏ expected͏͏ to͏͏ strain͏͏ operating͏͏ margins.
Luggage͏͏ Industry͏͏ on͏͏ a͏͏ Growth͏͏ Trajectory:
The͏͏ luggage͏͏ industry͏͏ is͏͏ set͏͏ to͏͏ experience͏͏ strong͏͏ growth,͏͏ with͏͏ volume͏͏ anticipated͏͏ to͏͏ increase͏͏ by͏͏ 15-18͏͏ percent͏͏ and͏͏ value͏͏ by͏͏ 10-12͏͏ percent.
E-commerce͏͏ sales͏͏ have͏͏ played͏͏ a͏͏ crucial͏͏ role,͏͏ with͏͏ online͏͏ channels͏͏ accounting͏͏ for͏͏ around͏͏ 50͏͏ percent͏͏ of͏͏ total͏͏ sales͏͏ for͏͏ major͏͏ players.
Footwear͏͏ companies͏͏ are͏͏ expected͏͏ to͏͏ register͏͏ low͏͏ to͏͏ mid-single-digit͏͏ growth͏͏ as͏͏ a͏͏ result͏͏ of͏͏ heavy͏͏ rainfall͏͏ and͏͏ a͏͏ decline͏͏ in͏͏ discretionary͏͏ spending.
Metro͏͏ Brands͏͏ is͏͏ expected͏͏ to͏͏ perform͏͏ better͏͏ than͏͏ its͏͏ peers͏͏ due͏͏ to͏͏ its͏͏ store͏͏ expansion͏͏ strategy,͏͏ while͏͏ mass-market͏͏ players͏͏ like͏͏ Bata͏͏ and͏͏ Relaxo͏͏ are͏͏ likely͏͏ to͏͏ encounter͏͏ revenue͏͏ weakness.
QSR Sector͏͏ Remains͏͏ Under͏͏ Pressure:
The͏͏ QSR͏͏ sector͏͏ remains͏͏ subdued,͏͏ impacted͏͏ by͏͏ aggressive͏͏ store͏͏ expansions,͏͏ reduced͏͏ out-of-home͏͏ consumption,͏͏ and͏͏ increased͏͏ competition͏͏ from͏͏ local͏͏ and͏͏ online͏͏ food͏͏ delivery͏͏ platforms.
Continue͏͏ Exploring:͏͏ QSR industry͏͏ sees͏͏ continued͏͏ pressure͏͏ on͏͏ dine-in͏͏ channel͏͏ as͏͏ delivery͏͏ platforms͏͏ gain͏͏ ground
Operating͏͏ margins͏͏ in͏͏ the͏͏ retail͏͏ sector͏͏ are͏͏ expected͏͏ to͏͏ stay͏͏ under͏͏ pressure,͏͏ mainly͏͏ due͏͏ to͏͏ increasing͏͏ input͏͏ costs,͏͏ intense͏͏ promotional͏͏ spending,͏͏ and͏͏ store͏͏ expansions͏͏ resulting͏͏ in͏͏ operating͏͏ de-leverage.
Centrum͏͏ predicts͏͏ that͏͏ EBITDA͏͏ margins͏͏ in͏͏ the͏͏ jewellery͏͏ and͏͏ luggage͏͏ sectors͏͏ will͏͏ face͏͏ challenges,͏͏ while͏͏ the͏͏ QSR͏͏ and͏͏ footwear͏͏ industries͏͏ are͏͏ likely͏͏ to͏͏ experience͏͏ similar͏͏ difficulties͏͏ due͏͏ to͏͏ lower͏͏ sales͏͏ and͏͏ rising͏͏ discount͏͏ levels.
Long-term͏͏ Positive͏͏ Outlook͏͏ for͏͏ Retail:
Despite͏͏ these͏͏ obstacles,͏͏ the͏͏ Indian͏͏ retail͏͏ sector͏͏ maintains͏͏ a͏͏ positive͏͏ outlook,͏͏ bolstered͏͏ by͏͏ long-term͏͏ trends͏͏ including͏͏ the͏͏ transition͏͏ from͏͏ unorganised͏͏ to͏͏ organised͏͏ retail,͏͏ growing͏͏ disposable͏͏ incomes,͏͏ and͏͏ a͏͏ rising͏͏ consumer͏͏ inclination͏͏ toward͏͏ premium͏͏ products.
The͏͏ sector͏͏ is͏͏ presently͏͏ trading͏͏ at͏͏ a͏͏ 5͏͏ percent͏͏ premium͏͏ compared͏͏ to͏͏ its͏͏ 10-year͏͏ average,͏͏ with͏͏ projected͏͏ double-digit͏͏ top-line͏͏ growth͏͏ anticipated͏͏ over͏͏ the͏͏ next͏͏ 2-3͏͏ years.
