Weak demand post GST rollout to hit retail sales growth, says IIFL

By: | Published: October 6, 2017 3:43 AM

We expect sales growth to moderate in 2QFY18 across retail companies, given weak demand post GST implementation. Healthy growth in September makes players optimistic on 3Q performance.

sale growth, sales growth post gst, post gst sales growthWe expect 5%/7% SSS growth for Jubilant/Westlife and 2% SSS decline for Shoppers Stop in 2Q. (PTI)

We expect sales growth to moderate in 2QFY18 across retail companies, given weak demand post GST implementation. Healthy growth in September makes players optimistic on 3Q performance. We expect 5%/7% SSS growth for Jubilant/Westlife and 2% SSS decline for Shoppers Stop in 2Q. Titan’s 2Q sales should grow 24% as market share gains in the key jewellery segment (32% sales growth) and healthy performance in the watch segment (10% sales growth) offset tepid response to activations and GST/PMLA impact. We prefer Titan and Jubilant in the sector. Potential stake sale of loss-making Hypercity format remains an upside risk for Shoppers Stop.

Despite tepid response to studded activations, GST-linked advancement of sales and implementation of PMLA, Titan continues to gain market share, driving 30% Ebitda growth in the jewellery segment. Further, channel restocking and healthy domestic demand should aid performance of the watch segment.

We expect 2% SSS decline, given weak demand post GST and lower-than traditional sales contribution from EOSS, given advancement to 1Q. We expect 7% SSS growth at Hypercity, a pickup from 1Q, as the impact of one-off events such as mall restructuring wanes. Ebitda margin should expand as marketing spends moderate, driving 2% Ebitda growth.

We expect SSS growth to moderate across QSR players given unfavourable bases and demand weakness. Ebitda margin should expand on the back of favourable mix and lower promotions (Jubilant). We expect 27%/28% Ebitda growth for Jubilant/Westlife. Jubilant’s focus on improving its value for money positioning (“everyday value’) and cost control initiatives place it well to benefit from demand pickup. Further, Titan should see 21% CAGR in jewellery sales over the next three years, aided by investments in product design, innovations, and a conducive regulatory environment. Potential stake sale of loss-making Hypercity and enhanced partnership with Amazon remain upside risks for Shoppers Stop.

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