India’s retail sector is among the worst hit due to the coronavirus crisis with impact ringing loud from jewellery to apparels. As many companies are close to announcing their Q4 results, revenue declines in the range of 3-14% are likely across sectors, according to a report by HDFC Securities. “Impact on profitability (EBITDA) will be even higher given the high fixed cost base in business models,” the report said. Jewellery business, for instance, was already under pressure due to higher gold prices. Higher gold prices, coupled with a decline in wedding-based sales due to lockdown, will have a downward effect of 5-15% on jewellery players such as Titan, especially if the lockdown situation persists.
Even for grocers, while sales have gone up for essential commodities due to stockpiling, several other roadblocks may have impact on Q1FY21 results as well. “These categories are typically margin dilutive … supply chain and manpower disruptions may impact service levels, ergo, sales too in Q1FY21,” the report said. Further, as malls etc remain closed, the declining footfalls may deliver further eat profitability. On the other hand, for FMCG companies, the coronavirus-led hoarding of essential items may help these players to deliver a bumped up revenue by 27% on-year, the report said.
The government may be able to cushion blow for certain players if it allows e-commerce services for non-essential items. “If online sales of non-essentials are permitted from 20th April, Aditya Birla Fashion Retail Limited and TCNS, which houses women’s apparel brands such as W and Aurelia, may be able to liquidate their inventory and salvage losses due to reduced footfalls. The Ministry of Home Affairs had earlier allowed ecommerce platforms to deliver non-essential items starting 20th April. However, the same order was revoked as the government faced pressure from trade body CAIT and small retailers.