Retail Q3FY19E Result Preview: Healthy festive demand to benefit apparel retailers

Apparel retailers like Trent, ABFRL, etc., are expected to report double-digit revenue growth during the quarter.

Jan 11, 2019 11:01 IST India Infoline News Service

Retail and textile players are expected to register a very healthy quarter owing to healthy festive demand for apparels and superior operating performance with the likes of Trent, ABFRL, etc., expected to report double-digit revenue growth during the quarter. Avenue Supermarts is also expected to report robust revenue growth on the back of aggressive discount offerings. However, aggressive discounts are expected to have a negative impact on DMart's EBITDA margin.

We expect Titan to report revenue growth of ~27% on the back of a ~29% growth in its jewelry segment on account of continued market share gains. However, healthy ad spend in its watches segment is likely to impact its margins. Footwear player Bata India is also expected to report ~9% revenue growth on account of the healthy growth in its new Red Label collection. In the innerwear segment, we expect Page Industries to report ~16% revenue growth supported by higher realizations.

Below are the Q3FY19E result expectations of the companies under our coverage.

Avenue Supermarts Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy (%)
Revenue 5,447 11.8 33.0
EBITDA 492 26.2 16.7
EBITDA margin (%) 9.0 103bps -127bps
PAT 293 29.8 16.6

The company is expected to deliver strong sales growth of 33% in Q3FY19E owing to aggressive store addition in the recent quarters. Aggressive discount offerings are expected to weigh on the margins. Going forward, same-store growth during Q3FY19E and store expansion guidance would be the key things to watch.

Future Retail Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy(%)
Revenue 5,025 2.0 9.8
EBITDA 249 0.8 23.8
EBITDA margin (%) 5.0 -6bps 56bps
PAT 170 -2.9 21.2

We expect Future Retail to deliver ~10% revenue growth during the quarter on account of healthy apparel demand during the festive season. Further, we expect that EBITDA margin expansion is expected to be limited to ~56bps owing to aggressive discount offerings.

Page Industries Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy (%)
Revenue 723 4.7 16.4
EBITDA 156 9.2 21.0
EBITDA margin (%) 21.6 90bps 82bps
PAT 103 11.2 23.5

Page Industries is expected to deliver ~16% revenue growth on account of higher realization owing to a favorable product mix. Further, volume growth combined with a higher share of outsourcing facilities are likely to drive EBITDA margin expansion of 82bps. Speedo's progress during the quarter would be the key thing for investors to consider.

Titan Co Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy(%)
Revenue 5,347 17.1 26.6
EBITDA 533 13.7 26.2
EBITDA margin (%) 10.0 -30bps -3bps
PAT 360 8.6 27.7

Titan, in its quarterly pre-result update, has guided  that the jewelry segment is expected to report healthy revenue growth due to an increase in market share. Store additions and an aggressive marketing campaign will aid in the revenue growth of its Watches segment. However, we expect EBITDA margin to remain almost flat due to higher advertisement expenses in the Watches division.

Trent Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy(%)
Revenue 606 -1.7 16.2
EBITDA 81 38.0 18.0
EBITDA margin (%) 13.4 387bps 20bps
PAT 45 36.1 18.5

We expect Trent to deliver ~16% yoy revenue growth during the quarter owing to the healthy growth of its Westside format (healthy festive demand for apparel business). The inclusion of Zudio will also aid in the growth. Its EBITDA margin is expected to expand slightly by ~20bps yoy.

ABFRL Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy(%)
Revenue 2,170 8.1 20.3
EBITDA 177 23.8 90.0
EBITDA margin (%) 8.1 103bps 299bps
PAT 63 48.4 NA

We expect ABFRL to generate ~20% yoy revenue growth due to healthy like-to-like growth of both its segments (Madura 7% and Pantaloons 8%) and aggressive store addition. Further, we expect a margin expansion of ~299bps owing to the optimization of store space, improving profitability of the Pantaloons business, and declining losses of Forever 21.

BATA India Ltd

Particulars (in Rs cr) Q3FY19E qoq (%) yoy(%)
Revenue 731 8.7 8.5
EBITDA 122 40.0 9.7
EBITDA margin (%) 16.7 374bps 18bps
PAT 78 40.6 14.8

We expect BATA to register 9% yoy growth on the back of the Red Label collection launch and the opening of new stores. Further, we expect that the premiumization of products and space optimization will lead to an EBITDA margin expansion of ~20bps yoy despite an unfavorable base. Hence, PAT is expected to grow ~15% yoy.

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