Indian retail sector is on the ‘cusp of accelerated earnings growth’ despite inflationary pressure as consumer sentiment bounces back from the Covid-19 pandemic, analysts told Business Standard.
“The shift in consumer preference from the unorganised sector to the organised, coupled with an uptick in domestic demand as people resume work from office, will cheer the Indian retail sector,” says Nishit Master, portfolio manager, Axis Securities.
According to the BS report, shopping malls are witnessing increased footfall in lower-tier towns and standalone stores as consumption picks up and mobility improves. Retailers, too, plan to ramp up store expansion in 2022-23 (FY23) as sales recover to pre-pandemic levels, it added.
While Aditya Birla Fashion and Retail (ABFRL) aims to add around 400 stores to its ‘Lifestyle’ format, Shoppers Stop plans to add 12/13 new department stores.
“Mall-based retailers like Shoppers Stop and Pantaloons could grow relatively fast in the first half of FY23 as uniform growth across channels pushed for healthy store expansion. As companies look to enhance the performance of their stores via renovations, we expect them to have a positive impact on their same-store-sales-growth (SSSG) figures in the first half of FY23,” wrote analysts at PhillipCapital.
Meanwhile, analysts at IIFL Securities told BS that they believe that quick-service restaurant (QSR) players reported positive SSSG in the January-March quarter of 2021-22 on a yearly basis, resulting in a positive SSSG for all players on a three-year compound annual growth rate basis.
When it comes to fashion and clothing, Gaurav Dua, head-capital market strategy, Sharekhan remains bullish on domestic players like Trent, ABFRL, and Bata India to perform well in the quarters ahead, driven by strong domestic demand.
The impact of inflation may act as a dampener across segments. The increase in freight and power costs due to the increase in crude oil prices and disruptions in supply-chain dynamics can put Indian retail players through the wringer, warns V K Vijayakumar, chief investment strategist at Geojit Financial Services.
However, to offset margin pressure emerging from high input costs and inflation, companies like Jubilant FoodWorks, Westlife Development, V-Mart Retail, Barbeque (BBQ) Nation, and Devyani International took price hikes in the range of 6 percent to 11 percent in April, noted the report.
