Festive season expected to revitalise recovery rates
We expect revenue recovery rates of fashion and lifestyle retailers to perk up in Q3FY21E to 65-75% from 45-55% in Q2FY21. In October-November recovery trajectory improved to ~75% owing to strong pent-up demand driven by festive buying. Various retail players indicated that tier-III and IV towns saw positive YoY growth in November. Furthermore, online sales gained robust traction with sales tracking 1.5-2x pre-Covid levels, supported by a low base. As per our channel checks, consumption demand post festive season may have softened a bit in December. Companies continue to channelise existing inventory in a bid to reduce fresh buys. Categories such as jewellery, open footwear, athleisure wear and kitchen appliances sustained recovery at a swifter pace compared to apparels and other accessories. Food & grocery retailers are expected to report positive growth YoY in Q3FY21E. We expect companies in our retail universe to report marginal revenue growth in Q3FY21E, with Titan, Page Industries and TTK Prestige expected to perform relatively better in the discretionary space.
Jewellery segment glitters for Titan…
Among discretionary categories, Titan’s jewellery division saw fastest recovery with the division reporting ~15% YoY sales growth in the quarter. The quality of growth is superior given it is driven by a revival in studded jewellery (though lower than previous year levels) and healthy traction in wedding jewellery. Recovery rate for watches & wearable division reached 88% in Q3FY21E (up from 55% in Q2FY21). We expect Titan to report overall sales growth of 15% YoY in Q3FY21E (including gold bullion sale worth | 334 crore). For Avenue Supermarts, its core ‘food & FMCG’ segment (currently ~77% of sales) reverted to the growth path with positive trajectory seen across all stores. Discretionary categories (GM & apparels) were slow to recover but are gradually picking up pace. Hence, we expect Avenue Supermarts to report revenue growth of 8% YoY. For branded apparel players, revenue recovery rate had reached ~70% in October. The rate further accelerated in November due to healthy festive demand and onset of wedding season. Trent had outperformed other lifestyle players with sales reaching 55% of pre-Covid levels (vs. peers 40-45%) in Q2FY21. Hence, we expect Trent, ABFRL, Bata to report revenue de-growth of 23%, 30%, 32%, respectively, in Q3FY21E. For TTK Prestige, festive season demand has been quite strong (~15% growth in October) while growth rate continued to be healthy in November also. The supply chain issues faced in Q2FY21 are largely behind and capacities are operating at optimum utilisation levels. We expect TTK to report revenue growth of 12.2% YoY in Q3FY21E. The Page Industries management had indicated double digit topline growth in September was expected to sustain in the festive season. We expect Page to report revenue growth of 12% YoY driven by higher realisations (shift in product mix towards athleisure wear).
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