The home decor industry is facing a tough time with a slump in consumer demand and poor performance of the real estate sector, said a report.
Most of the companies have either reported muted growth or single-digit growth with no sign of a turnaround in the near future.
“The home decor industry continues to face a challenging demand scenario, as evident from its Q2FY20 results missing estimates. Furthermore, management commentaries across companies spell out cautious outlook with muted guidance for FY20 given the slower than expected demand revival,” said a report, Edelweiss, adding the reason for the slump is “longer-than anticipated” revival of the real estate segment.
The slump is visible in ceramics, plywood, lighting pipes and other dependent segments.
“Competitive intensity in the real estate sector has persisted longer-than anticipated and stalling revival, thereby exerting more pressure on volumes and margins,” it added.
Moreover, companies are revising their growth targets downwards, sensing the slump in the sector.
For instance Kajaria Ceramics has revised its volume and revenue guidance to 10 per cent in H2FY20 from 15-20 per cent earlier, similarly, Somany Ceramics has lowered the top-line growth guidance from double-digit earlier to a single digit.
Even the plywood sector has revised down its revenue growth rate at two to three per cent.
“The challenging conditions weighing down the home decor industry are exerting most acute pressure on the plywood category. While, demand continues to remain weak on account of the subdued real estate scenario. On the other hand, high competitive intensity mainly from the MDF segment (substituting lower end plywood) is eating into volumes. Even the leader, CPBI is expecting muted growth of 2 to 3 per cent in the plywood segment, sensing no signs of revival,” it said
Further, the decor industry is likely to face pressure in near term owing to weak demand.
“Although the tax rate cut led to strong earnings growth in Q2FY20, it is unlikely to spur demand in our view, and the industry is, hence, unlikely to prune prices,” the report said.