Result Preview - Retail - Store expansion and lesser discounting period to remain key in Q1FY19

Further premiumisation of products, franchising and optimisation of store spaces are the factors that will aid companies to expand their margins.

Jul 22, 2018 02:07 IST India Infoline News Service

Retain and Textile players’ would register mixed revenue growth. Some of the players (like Titan, ABFRL, etc.) would register moderate revenue growth owing to higher base effect. Due to implementation of GST some of the companies’ sales got advanced to base quarter i.e. Q1FY18. However, companies like Avenue Supermarts, Trent, etc have added stores aggressively in FY18, which is expected to drive sales growth during the quarter for these companies.  

Further premiumisation of products, franchising and optimisation of store spaces are the factors that will aid companies to expand their margins. Overall retail companies have given lesser discounting days in this quarter. This will further aid companies to expand their margins.

Further, store addition and new launches guidance going forward would be of investor’s interest across all the companies. Below are the result expectations of the companies for Q1FY19E under our coverage. 

Top Picks: Trent Ltd, Arvind Ltd, Bata India Ltd

Avenue Supermarts Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue 4,480 17.6% 25%
EBITDA 380 29.0% 25%
EBITDA margin (%) 8.5% 75bps 6bps
PAT 225 34.6% 29%

Compnay is expected to deliver strong sales growth of 24.5% for Q1FY19E owing to aggressive store addtion during Q4FY18. Further, consolidation of loss making e commerce entity is expected to partially offset profitability growth owing to space optimization in the stores.

Arvind Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue        2,862 -4.3% 16%
EBITDA       263 -10.0% 27%
EBITDA margin (%)       9.2%  -58bps    81bps
PAT   82 -29.4% 33%

Arvind Ltd is expected to report healthy revenue growth of ~16% yoy owing to its expanded reach. Further, in retail business declining losses of emerging brands will aid company to generate an EBITDA margin of 9.2% during Q1FY19. Progress on the demerger would be the key thing to watch.

Future Retail Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue    4,987 9.0% 6%
EBITDA  274 36.1% 31%
EBITDA margin (%) 5.5%  109bps 104bps
PAT  211 50.5% 43%

We expect Future Retail to deliver ~6% revenue growth during the quarter on account of expanded retail presence and healthy growth of Easyday format. Further, we expect EBITDA margin expansion of ~104bps owing to operating efficiency and favourable product mix in its stores.

Page Industries Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue       821 34.9% 18%
EBITDA       172 17.1% 26%
EBITDA margin (%) 21.0% -319bps  135bps
PAT      114 21.3% 34%

Page Industries is expected to deliver ~18% revenue growth on account of higher realisation owing to favourable product mix. Further, volume growth combined with higher share of outsourcing facilities will drive EBITDA margin expansion. Speedo's progress during the quarter would be the key thing to consider for investors.

Titan Co Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue     4,320 5.2% 8%
EBITDA      435 -0.1% 19%
EBITDA margin (%)     10.1% -53bps 91bps
PAT   280 -9.2% 16%

Titan's jewellery segment is expected to report muted revenue growth owing to unfavourable base quarter. Further, we expect EBITDA margin expansion of ~91bps owing to higher share of revenues from studded jewellery. Store additions and aggressive marketing campaign will aid in the revenue growth of its watches and eyewear business.

Trent Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue          573 8.4% 15%
EBITDA            70 181.0% 20%
EBITDA margin (%) 12.2% 751bps 50bps
PAT           44 277.4% 15%

We expect trent to deliver ~15% yoy revenue growth during the quarter owing to healthy growth of its Westside format. Inclusion of Zudio will also aid in the growth. Further, closure of loss making stores will drive EBITDA margin expansion of ~50 bps yoy.

ABFRL (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue 1,811 3.3% 3%
EBITDA 117 -28.3% 58%
EBITDA margin (%) 6.5% -285bps 226bps
PAT 14 -87.6% -170%

We expect ABFRL to generate ~3% yoy revenue growth on a very high base of Q1FY18. The growth will be driven by lifestyle brands. Further, we expect margin expansion of ~226bps owing to optimisation of store space and other operating efficiencies.

BATA India Ltd (Rs in cr) Q1FY19E Growth qoq Growth yoy
Revenue 804 27.2% 9%
EBITDA 114 38.5% 19%
EBITDA margin (%) 14.2% 116bps 120bps
PAT 74 42.1% 22%

We expect BATA to register 9% yoy growth on account of launch of Red Label collection and opening of new stores. Further we expect premiumisation of products will lead to EBITDA margin expansion of ~120bps yoy. Hence, PAT is expected to grow by ~22% yoy.

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