Active Stocks
Tue May 28 2024 11:53:06
  1. Tata Steel share price
  2. 174.90 -0.34%
  1. ITC share price
  2. 429.85 -0.38%
  1. HDFC Bank share price
  2. 1,532.90 0.32%
  1. Infosys share price
  2. 1,470.50 -0.07%
  1. State Bank Of India share price
  2. 829.70 -0.53%
Business News/ Companies / Company Results/  Q4 results preview: Retail sector demand remains muted, soft recovery await in value space; Trent, DMart likely outliers
BackBack

Q4 results preview: Retail sector demand remains muted, soft recovery await in value space; Trent, DMart likely outliers

Q4 Result Preview: Retail sector demand remains subdued with slight sales improvement in February. March 2024 festivals could enhance demand. Revenue to rise by 21% YoY in 4QFY24. VMart Retail shows signs of recovery with 4% SSSG.

Q4 Result Preview: The retail sector's demand is expected to remain muted, says brokerage Motilal Oswal. Photo by Aniruddha Chowdhury/Mint on 7 Oct 2015.Premium
Q4 Result Preview: The retail sector's demand is expected to remain muted, says brokerage Motilal Oswal. Photo by Aniruddha Chowdhury/Mint on 7 Oct 2015.

The retail sector's demand is expected to remain muted, according to domestic brokerage Motilal Oswal Financial Services' Q4FY24 result preview report. This is because January's sales were weak and February's sales were marginally better, thanks in part to the prolonged winter season and the wedding season. March 2024 festive events, like Holi and Eid, may enhance demand. Compared to Tier 2/Tier 3 cities, metro areas and Tier 1 cities/towns continue to do better.

The brokerage projects that overall revenue would rise 21% YoY to 10,6000 crore in 4QFY24, mostly from footprint expansion, because same-store sales may continue to be weak for the majority of merchants.

The brokerage pointed out that while Trent Ltd/Avenue Supermarts Ltd (DMart) may be the outlier in the market, premium companies like Metro Brands Ltd, Aditya Birla Fashion and Retail Ltd, and Shoppers Stop Ltd are also seeing muted demand.

Nonetheless, the brokerage expressed its possibility for a mild rebound in the value sector, namely in VMart Retail Ltd. and Pantaloons.

Also Read: Q4 Results Preview | Telecom cos to report moderate growth on ARPU upgrades; Bharti Airtel, Jio to lead the pack

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

In its pre-quarter update, VMart recorded 4% standalone same-store sales growth (SSSG), which suggests a comeback, according to Motilal Oswal. Because fewer weddings occurred throughout the quarter, Manyavar is facing a muted demand environment.

“Trent and Avenue Supermarts remain strong candidates (BUY), considering their healthy balance sheets and strong secular growth momentum. Additionally, we like Raymond, which could benefit from the demerger of its real estate and lifestyle businesses. 

We continue to monitor VMart Retail, given its comfortable valuations, recovery in SSSG, and likelihood of a decline in losses. In the footwear space, Metro Brands remains a strong player (BUY) for its effective retail economics and healthy growth potential; however, the subdued demand environment may keep the stock rangebound for a few months," the brokerage said. 

Also Read: Banking sector Q4 preview: PSU Banks to continue to post better earnings growth than private banks, says Elara

Store additions to continue despite challenges

According to the brokerage's study, retailers typically have a strong quarter when it comes to store expansions. It anticipates that all of the players it covers will continue to have shop additions.

24 new stores were added in 4QFY24, according to a pre-quarter report from DMart (vs. 17 in 9MFY24). Nonetheless, VMart liquidated 19 loss-making locations as anticipated, which led to a net closure of 10 locations in 4QFY24. Trent, Metro, Raymond, and Intune are anticipated to be major outliers when it comes to aggressive shop additions. In 4QFY24, Westside/Zudio is expected to add 6/27 shops, bringing their overall store count to 233/444, according to the brokerage.

Also Read: TCS Q4 results on 12 April; From Dividend to focus on guidance, know about everything

Weak SSSG to weigh on margins

As to Motilal Oswal, the drop in raw material costs has alleviated the strain on gross margins. The brokerage anticipates that retailers won't raise prices this quarter because of the muted demand.

“Accordingly, we expect gross margins to remain flat YoY. However, a decline in SSSG could hurt store productivity and lead to operating deleverage. We expect overall PAT to grow by 9.6% YoY for our coverage universe," the brokerage said. 

Also Read: Stocks to buy: ICICI Bank, IndusInd Bank and SBI - top stock picks among banks from Motilal Oswal ahead of Q4 results

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

You are on Mint! India's #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 08 Apr 2024, 01:10 PM IST
Next Story footLogo
Recommended For You