The December quarter earnings of the country’s top two organised retailers –Reliance Retail and Avenue Supermarts–point to a shaky recovery in consumer demand. The weakness comes despite GST price cuts initiated during the festive season, which was expected to shore up spending, especially in urban areas. Rural demand, in contrast, has been resilient.
The uneven recovery raises questions about whether further stimulus may be needed to improve retail consumption in the forthcoming quarters, a point made by counterparts in FMCG too, who have reported mixed financial numbers in quarterly updates for the period.
Consider this: Reliance Retail reported its slowest profit (2.7%) and Ebitda growth (2.1%) in five quarters in Q3, hurt by not just a demerger of the FMCG business, but also muted consumer spending split over two quarters. Revenue growth (9.2%) was the slowest in four quarters despite an uptick in electronics and jewellery sales, considered seasonally strong for these categories. Ebitda margins slipped 50 basis points (to 7.8%), impacted by festive offers and promotions apart from investments in hyper-local commerce and a one-impact of the new Labour Code, according to Dinesh Taluja, CFO, Reliance Retail.
Avenue Supermarts, which runs DMart stores, saw its slowest growth in same store sales (SSG) in five quarters in Q3 at 5.6%. Revenue growth, while coming in at 13.2% y-o-y in the December quarter, was still “partially impacted” by a deflation in staples, Anshul Asawa, CEO-designate, Avenue Supermarts, said.
The trend is no different for other retail firms such as Trent and V-Mart Retail. Trent’s Q3 revenue growth of 17% as per its quarterly update was below its own topline growth target of 25% indicated during its July 2025 AGM. V-Mart’s SSG was flat in Q3 amid lower spending, which the retailer said was due to a shift in festivals such as Durga Puja to Q2.
Will the tide change anytime soon?
“Retail spending is improving gradually and should get better. While the picture appears mixed now, the trends are positive,” HM Bharuka, former VC and MD, Kansai Nerolac, and also an independent director at Avenue Supermarts, said.
Marico chairman Harsh Mariwala said that he sees consumption improving over the next couple of quarters. “It should take at least one or two quarters more for demand trends to stabilise, especially in urban areas,” he said.
Confidence Gap
Recent consumer confidence and inflation expectations surveys done by the Reserve Bank of India (RBI) point to stronger confidence in both urban and rural areas, easing inflation expectations and a calmer outlook on spending. The surveys give a broad picture of how households are feeling amid tariff and geopolitical uncertainties, experts said.
Urban confidence, for instance, strengthened as the Current Situation Index (CSI) improved 1.5 points to 98.4 from 96.9, according to the survey, which was done in November. The survey also noted that the Future Expectations Index (FEI) remained highly optimistic, increasing by 0.6 points to 125.6, showing that households continue to feel positive about the year ahead. Sentiments on jobs stayed similar to the previous round, with optimism about future employment remaining fairly strong.
Analysts at Nuvama said rising disposable incomes and a GST-led formalisation should support consumption growth. Both retail and FMCG benefits in terms of consumption are likely to accrue gradually, driven by affordability, wider availability and a shift from unbranded to branded consumption.