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Q3FY23 Retail: Demand slowdown weighs on performance

20 Feb 2023 , 10:39 AM

Growth across Retail sector in Q3FY23 was impacted due to demand slowdown post festive season with stress across discretionary categories of Jewellery, QSRs and Apparels. Among QSRs, pizza was impacted the most posting negative SSSG. Westlife (WLDL) bucked the trend posting SSSG of 20%. For Titan, demand picked up in January with consumers coming back post deferrals seen in November/December. Similarly, for Vedant Fashions (VFL), sales are expected to recover in Q4 due to 40-50% higher weddings days. 

Jewellery demand picked up in January:

Titan reported a growth of 11% YoY in jewellery slowing, both on YoY/3yr Cagr due to demand slowdown post the festive season. Secondary sales growth however was higher at 15% YoY. Further, demand bounced back in January despite elevated gold prices, as consumers came back post deferrals seen in November and December. Jewellery Ebit margin for Titan contracted by 70bps YoY, owing to higher marketing investments and pricing pressures.

Weak SSSG performance across QSRs:

Demand slowdown was visible across QSR sector with the highest stress across pizza QSRs reporting negative SSSG in the quarter. JUBI’s SSSG contracted by ~2% compared to Pizza Hut decline of 6%/4% for Devyani/Sapphire. KFC SSSG saw muted growth of 3% vs ~15% in Q2. Barbeque posted SSSG decline of 1%. Margins were under pressure due to inflation and negative operating leverage. However, WLDL bucked the trend posting healthy SSSG of 20%.

Higher wedding days in Q4 should support recovery in Apparels:

In Apparels, growth was impacted due to demand slowdown. While V-Mart, SHOP and Page saw deceleration in sales 3yr Cagr, ABFRL and Trent sustained the momentum. Sales growth for VFL was muted given lower wedding days in the quarter, which will spill over in Q4 supporting growth in the quarter. Margins were under pressure across players due to negative operating leverage.

Analysts at IIFL securities top picks in the sector are Titan and VFL.

Related Tags

  • results Q3
  • Retail
  • Retail Q3
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