Retailers likely to see strong revenue performance in July-Sept quarter

Retail companies are expected to see a strong top-line performance in the July-September quarter. 
 

Apparel firms are expected to see an uptick that started in the Q1FY23 with all Covid-19 restrictions getting lifted. 

“Cotton prices are still high, keeping margins under pressure,” broking firm Edelweiss Securities said in its report. ICICIdirect also expects a strong momentum to continue in the quarter due to festival demand coming in in the second half (H2). “We expect healthy growth momentum to sustain in Q2FY23 on the back of end-of-season sales (EOSS) in July, festival demand in the latter period of the quarter (H2 of September),” the brokerage said in its earnings preview report.

It also said that to disprove inflationary pressures, retailers across categories have taken price hikes to the tune of 12-15 per cent in recent times. 
 

Higher discounting and offers could aggregate to lower margins in Q2 due to EOSS.
 

“With higher rental and marketing expenses, we expect earnings before interest, tax, depreciation, and amortisation margins to fall 70 basis points quarter-on-quarter to 12.8 per cent (flat year-on-year, or YoY),” said ICICIdirect. 
 

Retailers also continued to expand their stores in the quarter. DMart opened eight stores, Titan Company added 25 jewellery stores and 38 Titan EyePlus outlets. Trent added 12 Zudio stores. VMart expanded its store count by adding 14 more. 
 

According to Dolat Capital earnings preview report, retail will be the highest ranked on revenue and earnings growth from its coverage. 
 

In its quarterly update, Titan Company said it witnessed healthy double-digit growth across most businesses, with overall sales growing 18 per cent YoY.

 

“The outlook for the festival season (from Navratri end-September) continues to be optimistic and is visible in positive consumer sentiment across categories,” it said.
 

Its jewellery division saw sales increase 18 per cent in the quarter, compared to last year, while its watches and wearables division saw sales go up 20 per cent. 
 

DMart expects its standalone revenue from operations to go up 35.7 per cent to Rs 10,384.66. crore in Q2FY23.
 

Edelweiss Securities expects Trent to clock industry-leading growth.
 

Aditya Birla Fashion and Retail is expected to clock 54 per cent YoY growth (134 per cent in Q2FY20), with Madura Fashion & Lifestyle expected to see 144 per cent increase. Pantaloons may log 172 per cent growth, compared to last year. “VMart has a presence in the value segment, which is more price-sensitive. Hence, recovery has been tepid, compared to other players,” ICICIdirect said in its report. 
 

The brokerage added, “We expect the VMart format (excluding unlimited revenues) to report YoY growth of 16 per cent (three-year compound annual growth rate of 5 per cent) to Rs 365 crore, mainly driven by higher price (company has taken price hike in range of 15-20 per cent) and healthy store openings.”
 

Dolat Capital expects revenue growth to be driven by price hikes and higher sales from launches; margins will remain muted due to high raw material costs. Systematix Research expects the impact on margins due to higher share of revenue from Zudio since it is a mass brand. 
 

The commentary to watch out for this quarter includes demand in smaller towns and store expansion strategy.