India’s Retail Sector: Mixed Performance in Q2FY25
The second quarter of the fiscal year 2025 has shown varied results for India’s retail sector, as reported by Centrum. While value retail, jewellery, and luggage segments are experiencing strong growth, the footwear and quick service restaurant (QSR) sectors are facing challenges.
Growth in Value Retail and Jewellery
Value apparel retail is expected to achieve a 15% same-store sales growth (SSSG), driven by tapering inflation and recovering rural demand. The jewellery segment is also projected to see a 15% SSSG, thanks to a reduction in customs duty from 15% to 6%. However, fewer wedding days have slightly impacted the sector’s performance.
Luggage Industry and E-commerce
The luggage industry is anticipated to grow by 15-18% in volume and 10-12% in value, with e-commerce playing a significant role, contributing to about 50% of total sales for major players.
Challenges in Footwear and QSR
Footwear companies are expected to see low to mid-single-digit growth due to heavy rainfall and reduced discretionary spending. Metro Brands is likely to outperform its peers, while Bata and Relaxo may face revenue challenges. The QSR sector is subdued due to aggressive store expansions and competition from local and online food delivery services.
Operating Margins and Future Outlook
Operating margins across the retail sector are under pressure due to rising input costs and aggressive promotional spending. Despite these challenges, the sector has a positive long-term outlook, supported by trends like the shift to organized retail and rising disposable incomes. The sector is trading at a 5% premium to its 10-year mean, with expected double-digit growth in the coming years.
Doubts Revealed
Q2FY25 -: Q2FY25 refers to the second quarter of the financial year 2025. In India, the financial year starts in April and ends in March, so Q2FY25 would be from July to September 2024.
Retail Sector -: The retail sector includes businesses that sell goods directly to consumers. This can include stores like clothing shops, grocery stores, and online shopping platforms.
Value Retail -: Value retail refers to stores that offer products at lower prices, often focusing on affordability and good deals for customers.
Jewellery Segment -: The jewellery segment includes businesses that sell items like gold, silver, and diamond jewellery. In India, jewellery is often bought for weddings and festivals.
Customs Duty -: Customs duty is a tax imposed on goods when they are transported across international borders. Reducing customs duty can make imported goods cheaper.
Rural Demand -: Rural demand refers to the buying needs and habits of people living in villages and countryside areas. It can be influenced by factors like agriculture and local economy.
E-commerce -: E-commerce is buying and selling goods or services using the internet. Websites like Amazon and Flipkart are examples of e-commerce platforms.
Operating Margins -: Operating margins show how much profit a company makes from its sales after paying for costs like rent and salaries. Rising costs can reduce these margins.
