Retail sales growth skids in first quarter
Thu July 11 2024
Retail sales growth slowed down in the April-June quarter due to lower discretionary spending by consumers, prolonged heatwave, fewer wedding days, and volatility in gold prices. Retailers across categories — from apparel, lifestyle and jewellery to grocery — and recent quarterly updates of companies such as Avenue Supermarts, Nykaa and Titan point to such a downturn.
“The April-June period this year has been difficult,” said Manish Kapoor, managing director & CEO, Pepe Jeans India. Beauty retailer Nykaa flagged a “muted” demand environment in Q1, saying that elections as well as heatwave had hurt sales growth in its physical retail business.
Avenue Supermarts, which operates DMart stores in India, said its Q1 sales growth would come in at 18%, lower than the 20% topline growth reported in Q4, on the back of a slowdown in discretionary spending. Both Avenue Supermarts and Titan closed flat at Rs 4,839.40 and Rs 3,223.95 on Wednesday in a weak market. FSN E-Commerce Ventures, which runs Nykaa, was down 0.31% to Rs 174.85, while shares of Vedant Fashions ended down 0.14% at Rs 1,050.20 on the BSE.
In the last five days, Titan shares have fallen 5% since its business update, while Nykaa and Avenue Supermarts have been range-bound as investors remain nervous. Titan is grappling with a surge in gold prices which is hurting jewellery sales.
The long election season and the severe heatwave prevented people from stepping out to shop, Pepe’s Kapoor said. “At a broader level, I believe there is intense competition for the share of wallet of the consumer today. There are multiple avenues available to people to spend their discretionary income. This is hurting retail sales,” he added.
For Vedant Fashions, which owns ethnic wear brands Manyavar, Mohey and Mebaz, this was the first time it had seen a “weak” wedding season for five quarters in a row — the whole of FY24 and Q1 of FY25 — its chief revenue officer Vedant Modi said. The June quarter, he said, was particularly challenging, since there were virtually no weddings.
The muted retail activity is also showing up in the business surveys of the Retailers Association of India (RAI), the apex body of organised retailers in India. For the April-May period, for instance, the overall sales growth across categories was 3-4% only against the same period last year, according to RAI. The trend is likely to continue in June, it added.
“Consumer spending on non-essential items remains cautious,” says Kumar Rajagopalan, CEO, RAI. Categories such as consumer durables had shown strong growth in Q1, driven by the heatwave. Air conditioners, in particular, saw record sales growth of over 30-40% in Q1 as against the year-ago period, according to the Consumer Electronics and Appliance Manufacturers Association.
Anand Agarwal, chief financial officer, V-Mart Retail, said the trend will change in the second half of the year, as the government is expected to give a fillip to consumption and the festive season may turn the tide for retail.
“The monsoon has covered most parts of India, with kharif sowing picking up. This will impact farm incomes in a positive way, which in turn will have a rub-off effect on consumption. I see the second half of the year being good for retailers,” he said.
Devarajan Iyer, executive director and CEO, Lifestyle International, India’s largest departmental store chain, says that the festive season may encourage consumers to loosen the purse strings. “Typically, during the festive season, consumers do come out and spend in India. We do expect some buoyancy in the second half of the year,” he said.
Source: https://www.financialexpress.com/