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Retail sector may see moderate growth in Q4

Retail sector may see moderate growth in Q4

By Rakshita Sareen

With a limited end-of-season sales (EOSS) period during the three months ended March 2019, the retail sector will see a moderate growth. Revenue, earnings before interest, tax, depreciation and amortisation (Ebitda) and the profit after tax (PAT) for Q4FY19 is estimated to grow by 17%, 17.7% and 11.8% year-on-year, respectively, analysts from Edelweiss said.

However, new store additions remained strong during the March 2019 quarter.

The retail sector recorded revenue growth of 23.1% y-o-y, Ebitda at 21.5% and PAT at 22% during three months ended December 2018 due to the shift in the festive season from September to October and the early onset of the EOSS in December.

The departmental store formats like Future Lifestyle and Fashion’s Brand Factory, Shoppers Stop, Pantaloons and V-Mart are expected to reach the same store sales growth (SSSG) of 15%, 5.5%, 3% and 4% y-o-y, respectively. Apparel brands such as Trent, Aditya Birla Fashion and Retail’s Madura and Future Lifestyle Fashion’s Central will clock the same store sales growth of around 9%, 4% and 6.5% y-o-y, respectively.

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While D-mart and Future Retail’s Big Bazaar are estimated to record SSSG of 15% and around 10%, respectively, the buoyant SSSG of other grocery retailers is likely to sustain, analysts from Motilal Oswal Securities said.

The analysts have estimated the margin expansion to be lower at 30 basis points as compared to 60 basis points in Q3FY19 for the retail market due to slower revenue growth. Yet, margins are envisaged to have mixed growth in Q4FY2019. The margin of apparel firms will dip due to lower operating leverage benefit and brands like Shoppers Stop and V-Mart expanding their management strength.

Aditya Birla s Pantaloons and Madura will see revenue growth of 20% y-o-y and faster growth in innerwear and luxury categories. But, higher losses in the innerwear segment will result in margin compression of 65 bps, analysts from Kotak Institutional Equities observed.

While D-mart is estimated to be flat in terms of margins, grocery retailer like Future Retail is expected to expand margins, also because of Hypercity breaking even.

The consumer sentiment that was improving has taken a pause and macro data points are expected to deteriorate, analysts said. While the threat from online players has eased for apparel retailers, the same has intensified for grocery firms.