After a weak first quarter, retail firms are expected to post 28 per cent growth in their net profits in the second quarter (Q2) of the current financial year, according to stock brokerages. The reasons, they say, are good discount season and improved same-store sales.
Retail companies are expected to post a 27 per cent growth in topline during the quarter.
The first quarter of FY12 saw retail companies posting a decline of two per cent in net profit even as there was a 37 per cent increase in net sales. For, the bottomline of the companies were affected due to lower volumes and declining same-store sales growth due to increase in apparel prices and softening of consumer demand.
Retail companies hiked apparel prices by 10-15 per cent due to increase in raw material prices and increase in excise duty on branded apparel.
“The discount season has been well received, with improvement in LTL (like-to-like) volumes and sales growth,” Motilal Oswal said. “Pent-up demand post the 15 per cent price increase has led to the pick-up in LTL volumes,” its analysts Amnish Aggarwal and Harit Kapoor said in a report.
The extension of sale season by retailers, they said, should increase growth in second quarter of FY12. Raheja-owned Shoppers Stop increased its sale season by five days and Pantaloon extended the sale period of Big Bazaar from five to six days.
Analysts expect Pantaloon’s same-store sales growth to increase from 15 per cent in the first quarter to 20 per cent during the Q2 of FY12. However, its margins are expected to come down on account on its sale drive. Same-store sales is a matrix used to gauge the performance of stores which are there in the business for a year or more.
Shoppers Stop, which has opened over 10 stores in FY12 so far, is likely to improve its same-store sale growth to mid-teens from seven per cent during the first quarter.
However, Sangeeta Tripathi, senior equity analyst at stock brokerage Sharekhan, expects retail companies to post lower numbers due to slower economic growth during the quarter.
“We do not expect very good numbers during the quarter,” she says. “Normally second quarter is muted in terms of growth. The economic slowdown and inauspicious days during the quarter are likely to have an impact on the earnings of retailers.”
Analyst also expect the margins of retail companies to be under pressure due to aggressive expansion during FY12.
Pantaloon plans to open 88 stores across different formats or 1.05 million square feet of retail space.
Pantaloon, the country’s largest retailer, is expected to post a net profit of Rs 49.7 crore in the September quarter. This is ten per cent higher than the profit it posted in the corresponding quarter of FY11. Higher interest charges, analysts say, will lead to lower profit growth. The company had a debt of Rs 4,200 crore as on June 30 this year.
Shoppers Stop is expected to post a net profit of Rs 19 crore during the Q2, showing an increase of ten per cent over Q2 of FY11. Its net sales are expected to go up by 35 per cent.
Titan Industries is expected to post a net profit of Rs 164 crore in Q2, showing an increase of 30 per cent over the corresponding quarter last year.
The company is expected to register a net sales of Rs 2,116, which is 37 per cent higher than what it posted in the Q2 of FY 2011.
