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Revenues to decline significantly sequentially amid Covid-19 second wave…

Q4FY21 had exhibited a sense of normalcy with revenue recovery across retailers hovering at ~80% of pre-Covid levels. However, lockdowns due to second wave in April, May derailed the recovery process and Q1FY22E performance is expected to be negatively impacted. With a significant surge in Covid-19 cases across some states in India, footfalls dropped to 35% of pre-Covid levels in April 2021 with 45-50% of stores being operational. The situation deteriorated further in May as most states across India announced lockdowns to control the spread of the second Covid wave. Some larger states like Maharashtra are still operating with restrictions, which is expected to curtail the pace of revenue recovery. On the cost side, companies are negotiating with store/mall owners for rental waivers and are hopeful of getting rental waivers (quantum could be marginally lower than last year), providing some solace to retailers in the low revenue scenario. June saw several states gradually reopening markets with a reduction of restrictions imposed on trade activities. With lower restrictions on trade activities, the recovery is expected to gradually gain ground in June. We expect companies in our coverage universe to report a sequential decline in revenue of ~ 50- 65% in Q1FY22E. Margins are expected to remain under pressure owing to raw material inflation and negative operating leverage.

Avenue Supermart, Page, TTK, to report lower revenue degrowth

Owing to significantly lower store operational days (~47% in Q1FY22), Titan’s jewellery division is expected to report revenue decline of ~60% QoQ (107% YoY growth). With nearly no sales in May, green shoots were visible in June with gradual re-opening of stores. Despite fewer operational days in June 2021 (~58%), sales growth was marginally better on a YoY basis in the jewellery segment. The watches and eyewear segment also witnessed a rapid recovery in footfalls with the re-opening of stores (watches segment to report 48% QoQ de-growth). Overall revenues for Titan (excluding bullion sales) is expected to record growth of 117% YoY (down 60% QoQ). For Avenue Supermarts, localised restriction on store operations (32% stores in Maharashtra, 18% in Gujarat) is expected to impact performance in Q1FY22. More than 80% of D-Mart stores in April-May were operating at significantly lower number of hours. We expect the company to report revenue degrowth of 31% in Q1FY22 (up 32% YoY). Fashion retailers are expected to be impacted the most owing to malls facing higher government restrictions. We expect Trent, ABFRL, V-Mart to report revenue decline of 70%, 65%, 56%, respectively, on a sequential basis. Page Industries and TTK Prestige are expected to report QoQ revenue decline of 47%and 41%, respectively.

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