The retailer segment, which has been feeling the impact of a slowing economy and rising inflation for nearly a year, is showing early signs of a revival during the ongoing festival season, said Nuvama Institutional Equities citing response from its ‘initial feelers’.
According to a report from the broker, the retail business in India will see a growth of around 11-16 % in the offline arena while the online market will see a growth of more than 20%.
“Initial estimates for the festive season are positive, with multiple industry bodies building in double-digit growth for both online and offline,” it said.
Analysts Abneesh Roy, Ashish Vanwari and Nihal Mahesh Jham expect “low-to-mid double-digit” growth for offline retailers on a like-to-like basis. Like-to-like calculations strip out the impact of new stores and give a clearer picture of how consumer spending is evolving.
For online retailers, for whom like-to-like does not apply, growth is estimated at 20% during the festive season this year, the analysts said.
The estimates are based on Onam and Durga Puja trends. The analysts pointed out that consumer goods and other retail businesses saw growth of over 20% during the recent Onam festivals.
The shift in growth in the third quarter, comes after the consistent staggering and weak performances seen in the past few quarters.
Retailers and consumer goods makers have been seeing considerable decline in growth during last year due to various reasons including high inflation and weak consumer sentiments. A huge number of job losses and other macro economic factors have also contributed to consumers losing interest in these goods.
A shift in the festive season during the past quarters has also affected the decline in consumer demand. At the same time this shift could also positively impact the current quarter as several major festivals fall in this period.
However, it should be noted that most of India is yet to get into the festive mood. Several key celebrations — such as Dussehra and Diwali — are slated for late October and November.
Overall, the festive season contributes around 35-40% of annual sales for retail companies.
Winners & Losers
However, not all segments are seeing renewed traction, with some, such as garments, leading from the front.
“Apparel is seeing maximum traction and has seen a strong start in East India reporting double-digit better performance,” the Nuvama analysts said.
The apparel segment has seen the rise of new, pocket friendly chains such as Zudio and Intune. Moreover, the fashion and lifestyle sector is expected to continue to do well even after Diwali into December fuelled by the wedding season demand.
On the other side, categories such as jewelry, fast food industry and inner wear industry are showing little benefit from the festivities.
“Innerwear is not seeing any pick-up..Jewellery picked up only recently after Shraadh was completed. However, the recent spike in jewelry prices has seen conversions slow.. QSRs – not much effect from festive yet,” said the analysts.
The analysts also pointed out that demand recovery is limited to urban areas while in rural India demand is still at challenge.
“Urban continues to outpace rural. Rural demand continues to be challenging…Election related stimulus, recovery in Sep-23 rains, softer retail inflation and a weaker base may aid in a gradual recovery,” said the report.