Quick Service Restaurants and some franchise retailers may bounce back earlier as compared to other segments even while overall retail recovery is likely to a year due to coronavirus lockdown.
Quick Service Restaurants and some franchise retailers may bounce back earlier as compared to other segments even while overall retail recovery is likely to a year due to coronavirus lockdown. In fact, Jubilant is likely to emerge stronger after the current crisis is over thanks to three Cs which are crucial to stay afloat during dire times, a CLSA report said recently. These three Cs include cash, i.e. a company’s ability to sustain a liquid balance sheet and converting inventory into cash, cost i.e. converting fixed cost into variable cost to reduce operating leverage and ability to attract consumers again. “Among affected sectors, we expect QSR to recover fastest given lower end discretionary consumption. We expect Jubilant, Westlife and Titan, all strong franchisees to emerge stronger from this given their ability to manage the three Cs better,” the report said.
While the government has now allowed businesses to resume after a lockdown of over two months, consumer discretionary companies will have to make efforts to sustain business loss for a protracted period as even government support is little for these companies. “Retailing space is progressively restarting in a phased manner, but it could be end of this year before operations normalise for many,” the report said. For players in jewellery and multiplex business, recovery is likely to be slow. Theatre chains PVR and INOX are also reeling under a threat from higher adoption of OTTs. Coronavirus pandemic has also aggravated the issue for them as consumers remain skeptical to go into public spaces due to safety concerns.
Meanwhile, it is likely that the consumer goods companies will extend discounts and promotions to lure customers back again in the aftermath of coronavirus. “We expect increased promotions post lockdown to convert inventory into cash,” the report said. For apparel retailers, the same may happen via End of Season sale (EoSS). On the other hand, players such as Titan may also look into increasing promotions particularly in exchange-focused schemes as they look to drive inventory liquidation.