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We expect our Retail coverage universe to post revenue growth of 11.7% YoY as the consumer discretionary sector witnessed a mixed demand environment in Q4FY25, characterized by moderate volume growth, weak footfalls, and varied consumer sentiments across apparels and footwear categories. The wedding and festival seasons tailwinds in Q3FY25 continued in January while moderating sequentially during February-March 2025. Premium brands continue to see resilience and value firms benefitting from strong consumer sentiments. We expect net new store openings to drive growth. Same store sales growth (SSSG) remains muted in the low single digits for brands while that for value retail companies continue to see robust high single digits. This signifies growth will remain subdued in FY25 despite favorable base once store rationalization peaks and demand continues to be subdued amid increased competition. Lower raw material prices may support margin for our retail coverage universe – EBITDA margin may expand 42bp YoY to 19.0% in Q4FY25E. We expect APAT growth of 1.1% YoY with a margin of 8.9%, in Q4FY25E. Our top picks are Vishal Mega Mart (VMM IN), Page Industries (PAG IN), Metro Brands (METROBRA IN) and Bata India (BATA IN).  

Apparels demand remains muted: We expect apparels revenue growth of 11.5% YoY, led by store openings and muted SSSG growth. Demand showed mixed trends with January witnessing improvement and a gradual fading until March. We expect store additions to be on track with network rationalization nearing completion. We expect SSSG for Vedant Fashions (MANYAVAR IN) to be at 4%, led by favorable base. Go Fashions (GOCOLORS IN) SSSG could be 0.2%, due to muted demand coupled with lower footfalls and conversion rates in Q4FY25E.

Innerwear scripts a rebound, led by premium and athleisure segments: Revenue of innerwear companies is set to grow 11.7% YoY with improved demand on the onset of Summer season further supported by improvement in athleisure demand. The economy segment continues to face competitive pressure. We expect Page Industries (PAG IN) to report revenue growth of 10.0% YoY and Dollar Industries (DOLLAR IN) at 15.1% YoY in Q4FY25E, led by volume growth. Margin may improve for PAG, led by lower raw material prices and favorable product mix tilted toward athleisure products along with operating leverage.  

In footwear space, premium segment holds, mass market faces pressure: In Q4FY25, our checks suggest the premium segment sees traction vs mass product categories. Footwear universe companies experienced weaker footfalls, with growth fueled by the premium and casual segments while the mass category faced softer demand environment. Discounting remains a key lever to drive volume growth, with limited pricing power. We expect our footwear coverage universe to post 7.2% YoY revenue growth, with 182bp YoY margin expansion. Campus Activewear (CAMPUS IN) is likely to post the sharpest growth of 12.5% YoY, followed by Metro Brands (METRO IN) at 10.5% YoY, Relaxo Footwears (RLXF IN) at 8.0% YoY and Bata India (BATA IN) at 1.6% YoY. We expect PAT to contract by 1.0% for our footwear coverage universe due to negative operating leverage on store openings.

Vishal Mega Mart – consumer sentiments remain intact: Vishal Mega Mart continues to see robust footfalls and conversion rates. Consumer preference for value shopping remains intact. We expect VMM to post 17.2% YoY revenue growth, led by 17 new stores in Q4FY25E, taking total store count to 685 stores. We expect PAT margin to remain flat by taking into consideration operating leverage from higher SSSG and favorable base. We expect VMM to report 12% SSSG for FY25E.

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