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Despite a promising start to the festive season, most sectors, excluding jewellery and travel, seem to have hit the snooze button, as per a report released by HDFC Securities.

Several factors contribute to this, including the normalisation of ticket sizes and purchase frequencies, weak footfalls (on a per sq ft basis), and a trend towards downtrading.

With a few exceptions, SSSG (especially for apparel and footwear) has ranged from -5 per cent to 2 per cent.

Both retail and distribution channels continue to grapple with elevated inventory levels. This has led to an early commencement of End of Season Sales (EoSS) by 2-3 weeks and higher discount levels in the system. Consequently, margins are likely to be weak, the report said.

"Our interaction with key stakeholders/companies suggested that although the initial response in the festive season was healthy, demand took a beating from mid-November onwards in apparel, innerwear, and footwear. Sales densities were weak, with SSSG ranging from -5 per cent to +2 per cent by the third week of December," the report said.

In terms of sub-categories, Indian ethnic wear performance was good courtesy the festive/wedding season; however, menswear and women’s western wear, winter wear and innerwear continue to struggle, it added.

Given the gold price tailwind (up 13 per cent YoY till December 20, 2023), most jewellery companies continue to do well in terms of growth. However, ticket sizes have inched down for the industry. Grammage (per store basis) continues to decline. Most companies have been aggressive in expanding YoY; hence growth rates are expected to be in the high-teens to mid-20 per cent, the report said.

Most discretionary categories, excluding jewellery and travel, are staring at moderating growth, negative-to-flat SSSGs, and potential contraction in margins.

"Hence, we suspect the earnings downgrade cycle to continue," the report said.