Pizza QSR was more impacted than Burger QSR with companies reporting a SSS decline as well as EBITDA margin contraction. Burger QSR companies reported a low single digit SSS growth during the quarter. In Jewellery, Titan reported robust sales growth. Apparel sector witnessed continued demand weakness and it was further affected by a festive mismatch versus Q2FY23. IIFL’s top picks in this sector are Trent, Vedant Fashions, Shoppers Stop, Nykaa and Titan.
Titan: Strong growth
Titan’s Jewellery division reported sales growth of 19% and EBIT margin of 14.1% (ex-bullion). The positive demand momentum of Q1 continued through Q2 in jewellery business and there was also positive impact of “Shraad” being delayed to October this year. Post 10th October, the company has seen some demand sluggishness on the back increase in gold prices.
QSR: Demand remains soft
Weak demand trends continued to weigh on QSR sector performance, reflected in the muted/negative SSSG reported by the companies. An additional month of Shravan in this quarter further dampened the demand. With 4% SSS decline, Jubilant was better than Pizza Hut which reported a SSS decline in Devyani/Sapphire of 10.4%/20% respectively. This impacted the EBITDA margins with Jubilant reporting a 341 basis points YoY margin contraction whereas Devyani and Sapphire reported a YoY EBITDA margin contraction of 350 basis points/50 basis points respectively. Burger QSRs were better placed than Pizza QSRs. Burger King and Westlife reported a SSSG growth of 3.5%/1%.
Apparel retail
Peculiar aspects of the quarter have been growth slowing down from the previous quarter in most cases driven by a continued demand weakness, festive mismatch (a late Diwali this year) and a high base in some cases. Same store sales has witnessed a low to mid single digit decline for most companies in this space. Trent continues to be an outlier with LFL growth of 10% and overall top-line growth of 59%, driven by steady store additions in Zudio format. Commentary on Q3 so far is a mixed bag, with Manyavar and V-Mart sharing a bullish commentary, Go Fashion and SHOP have been more measured, while ABFRL has witnessed a sharp recovery in wedding related categories.
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