Consumer sentiment slowdown may cap potential for retailers1 min read . Updated: 15 Apr 2019, 12:12 AM IST
- Eyes are on some important indicators such as same-store sales growth
- Department-store formats are expected to clock mixed growth on SSSG
It’s easy to see why some retailers have had a good year and are expected to show revenue growth of between 4-34% for the March quarter, according to analysts. Strategic store expansions and a focus on store economies have helped some retailers to deliver the goods. Others are getting their act together and focusing on store economics.
However, eyes are on some important indicators such as same-store sales growth (SSSG), particularly in the retail sector, which has wafer-thin margins. As retailing is generally a low-margin business, the more retailers are able to leverage stores, the better the profitability. SSSG is the comparable sales growth of stores that have been operational for over a year.
On that score, analysts say that SSSG is mixed. Apparel retailers are not likely to show much SSSG improvement given that the sales season was for a limited period.
Department-store formats are expected to clock mixed growth on SSSG. Grocery retailers, however, are expected to show buoyant SSSG.
“Trent, Aditya Birla Fashion Retail Ltd’s Madura and Future Lifestyle Fashions Ltd’s Central are likely to clock SSSG of respectively 8-9%, 4% and 6.5% YoY. Department-store formats such as FLF’s Brand Factory, Shoppers Stop Ltd, Pantaloons and V-Mart Ltd we expect to post SSSG of respectively 15%, 5.5%, 3% and 4% YoY," noted Edelweiss Securities Ltd in a note to clients.
“Grocery retailers’ buoyant SSSG is likely to persist—while D’Mart of Avenue Supermarts Ltd is expected to report 15% SSSG," noted the report.
Store expansions have also been healthy. Analysts note that most retailers have added 15-20% area annually. That has aided growth and revenue expansion, which has rubbed off on retail stocks.
Lately, though, consumer sentiment is showing signs of tapering down. Analysts note that worsening macro data points to lower discretionary offtake.
“In some cases, the market might have already factored in earnings of the next two-three years, given the strong earnings assurance of companies. This might leave little further potential," said Motilal Oswal Securities Ltd in a recent report.
So, even while most retailers offer a decent revenue beat and profit growth, much of that may be factored in.