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Retailers lose $25-30 billion in revenue, pin hopes on festive season

According to Kumar Rajagopalan, CEO of the Retailers Association of India, the sector usually clocks $40 billion-$45 billion in revenue in April and May collectively.

June 09, 2021 / 01:44 PM IST
Retail Sector | Representative Image (PC-Shutterstock)

Retail Sector | Representative Image (PC-Shutterstock)

 
 
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India’s retailers have been on a roller-coaster ride since last year, when the first wave of the COVID-19 pandemic struck the country. Without any sales in the first quarter, when the country was under lockdown, they inched towards recovery in the second quarter and shopping finally picked up in the third quarter with the festive season. Most retailers had either recovered or were almost there by the fourth quarter of FY21.

Just when things were looking up, their progress was derailed and retail was back to square one as the second wave engulfed the country in late March. Now, after almost two months of lockdowns and restrictions, retailers are staring at huge losses.

According to Kumar Rajagopalan, CEO of the Retailers Association of India, the sector has lost $25 billion-$30 billion, which is more than half of the $40 billion-$45 billion in business generated during April and May.

The impact of the lockdown has been felt across the board, said Rajagopalan. Even food and grocery stores, which were allowed to open given their essential nature, lost business.

Malls incurred losses to the tune of Rs 3,000 crore in the eight weeks since lockdowns were imposed by state governments including Delhi and Maharashtra, the Shopping Centres Association of India said in May.

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Shoppers Stop, Aditya Birla Fashion & Retail, Relaxo Footwears and V-Mart don’t expect normalcy to return in the first quarter of FY22 because consumer spending will remain subdued. They indicated that the recovery may start from the second quarter (July-September), as the festive season starts.

Recovery derailed 

According to a survey report by RAI in May, the discretionary segment such as sports goods, footwear and jewellery were the most affected in April due to the curbs, although food and grocery also suffered.

Retail sales hit in April

“As grocery stores were allowed to open only for limited hours, as opposed to the last time when they could operate the entire day, their sales were impacted,” Rajagopalan said.

Reliance Retail, which houses supermarket chains Reliance Fresh and SMART, reported that footfalls dropped to 35-40 percent of pre-Covid levels in April, while consumer sentiment took a hit as they cut down on non-essential purchases. About 80-90 percent of its grocery stores operated at 50 percent levels in April.

Non-essential segments such as footwear and apparel fared worse. Relaxo Footwears MD Ramesh Kumar Dua, while reporting the company’s fourth-quarter earnings, said only three of its eight production facilities functioned after COVID-related restrictions were imposed.

“Only 15% of the market is operational at the moment,” Dua said in late May.

Relaxo’s profit almost doubled to Rs 102 crore in the fourth quarter from Rs 51.80 crore a year earlier.

Aditya Birla Fashion’s earnings before interest, tax, depreciation and amortisation jumped 51 percent to Rs 253 crore in the fourth quarter ended March from Rs 167 crore in the corresponding period last year.

Festivals to chase away the lockdown blues?

Most retail companies are pinning their hopes on the festive season to bring back demand, much like last year. From value fashion seller V-Mart to departmental stores chain Shoppers Stop, retailers are hopeful that footfalls will return as the country gets into celebratory mode.

The festive months are typically the busiest shopping season in the country. Starting with Onam in August this year and Ganesh Chaturthi in September, the season peaks during Diwali in November and continues till Christmas.

Last year, we witnessed a good recovery after the reopening and hence expect a similar experience this year too, said Anand Agarwal, CFO of V-Mart Retail.

“We expect recovery to start from Q2 and progressively get better in Q3 and Q4. This year, Diwali and Dussehra are early, so this would also help in bringing back the business on track,” Venugopal Nair, CEO and MD of Shoppers Stop, told investors on an earnings call in May.

However, experts said retailers could be impacted severely if a third wave of COVID infections hits the country and lockdowns and restrictions are imposed again.
Devika Singh
first published: Jun 9, 2021 01:44 pm

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