Retail: Festive, wedding season could lead to steady Q3

By: |
Published: November 30, 2019 1:11:47 AM

Festive and wedding season could lead to steady Q3; Trent, ABFRL, FLF & JFL top picks.

retail, retail sectorIn grocery retail, Future Retail lagged at 9.4%.

Q2FY20 saw aggregate revenue growth for companies in our retail coverage at 12.3% y-o-y (Q1FY20: 16.7%), largely affected by the macroeconomic slowdown, weak consumer sentiment and excessive rainfall in some parts of the country; a few stood out though. In apparel and grocery retail, Trent (Westside SSSG: 13% y-o-y) and Avenue Supermarts (revenue up 22.4% y-o-y) outclassed industry. ABFRL and FLF surprised with Pantaloons’ & Madura’s 10.4%/7% y-o-y SSSG and Central’s 10.3% y-o-y SSSG, respectively. Titan’s jewellery segment edged down 1.5% y-o-y owing to weak demand (due to surge in gold price and general slowdown) and adverse impact of hedges. In QSR, Jubilant FoodWorks clocked moderate SSSG of 4.9% y-o-y, but strong store addition of 9.9%
y-o-y fueled top-line growth of 12.1%. Top picks: Trent, ABFRL, FLF and JFL.

Outperformers continue to shine

In apparel retail, Trent grew fastest with a 32.8% y-o-y increase in revenue. ABFRL surprised with Pantaloons’ 10.4% y-o-y SSSG and Madura’s 7% y-o-y SSSG – sustaining this growth would be key. Brand Factory remained subdued—6.1% y-o-y SSSG due to stock liquidation. Shoppers Stop and V-Mart lagged with 0.1% y-o-y and 1% y-o-y SSSG, respectively. In grocery retail, Future Retail lagged at 9.4%.

Jewellery demand under pressure

Titan’s jewellery business dipped 1.5% y-o-y. That said, Titan fared better than the industry. In QSR, Jubilant FoodWorks clocked moderate SSSG of 4.9% y-o-y, but strong store addition of 9.9% y-o-y fuelled top-line growth of 12.1% (better than Pizza Hut’s sales growth of 2% y-o-y). Wonderla’s revenue dipped 1.2% y-o-y.

Model Retail Portfolio & Outlook

We assign weightings of 35% to ABFRL, 25% to Jubilants Foodworks, 20% each to FLF and Trent. While the macroeconomic slowdown impacted industry wide SSSG, recently concluded festive, upcoming wedding season and winter can help in steady Q3FY20. For grocery retailers, we expect ongoing consumer slowdown to slightly dent SSSG. That said, we believe continued store expansion for apparel and grocery retailers will drive revenue growth. For QSRs, we expect ongoing tussle between food tech aggregators and restaurant owners to bode well for Jubilant Foodworks.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Sebi imposes Rs 2 lakh fine on Unitech for violating Listing Agreement
2HDFC MF front-running case: Sebi levies Rs 85 lakh fine on 7 entities
3NSE commodities segment gets recognition from CBDT, traders to get tax benefit