Q1FY24 Review: Retail: Demand remains soft

22 Aug 2023 , 11:10 AM

In Q1FY24, deceleration in demand continued in the Retail sector. Pizza QSRs were the most-impacted due to higher penetration in the category. However, Burger QSRs bucked the trend, posting healthy SSSG and Ebitda-margin expansion. In Jewellery, Titan posted robust sales from company-specific initiatives, though margins were impacted during the quarter. Apparels witnessed subdued growth given the weak demand, high base and lesser wedding dates. Analysts of IIFL Capital Services top picks in the sector are Titan, Shoppers Stop and Vedant Fashions. 

Titan – margins decline:

Titan’s Jewellery division reported sales growth of 19% (ex-bullion), despite volatile demand conditions due to several company initiatives such as investments in gold-on-exchange offer, regional brand-building campaigns and gold-rate rationalisation program to gain market share (MS) — which in addition to driving growth, impacted margins as well. Ebit margin (ex-bullion) contracted by 150bps YoY (ex-one off in base). However, demand trends were robust in July; the company is bullish about prospects in Q2, supported by higher studded ratio. 

QSR – weak trends continue: 

SSSG across formats continued to be weak, with pizza QSRs being the most-impacted. With -4% SSSG, JUBI was slightly better than -5%/-9% for PH Devyani/Sapphire. This impacted margins with JUBI/ BBQ posting 345bps/ 813 bps YoY Ebitda margin contraction. Devyani and Sapphire reported 296bps and 142bps Ebitda-margin contraction, respectively. Burger QSRs were betterplaced, posting healthy SSSG and Ebitda margin expansion. 

Apparel – soft gets softer: 

Apart from Trent, which recorded 12% SSS growth (Westside + Zudio), the Apparel sector witnessed a very subdued quarter impacted by multiple factors – weak demand, a high base, lesser wedding dates, among others. Manyavar was the mostimpacted company (SSS decline of 22%) and Page suffered a doubledigit volume decline for the third consecutive quarter. Companies are hopeful of a pickup in Q3FY24, backed by a larger festive season.