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Overall retail sector earnings are expected to grow in double digits for the quarter ended June 2018, but far lower growth than the year-ago period.
Edelweiss Securities estimated its retail universe’s Q1FY19 revenue, EBITDA and PAT to grow 7.6 percent, 15.2 percent and 20.9 percent YoY, respectively (28 percent, 39 percent and 54 percent YoY in Q1FY18 respectively). "In Q1FY19, there is a high base for most of the apparel retailers and Titan, thus growth this quarter will look muted. Also for most of the discretionary consumption (especially garments and jewellery), there was an impact due to inauspicious days (Adhik Mas).
Titan’s jewellery segment had strong base of 54 percent growth and hence growth would look soft, it feels.
The report said same-store-sales growth (SSSG) for most of the apparel retailers is likely to be soft, except Trent. "For V-Mart, we expect around 2 percent SSSG on a high base of 23.1 percent, for Trent we expect around 8 percent SSSG on a base of 14 percent."
"For grocery retailers, SSSG run-rate will continue to remain buoyant, it feels. "D-Mart is expected to report SSSG of around 15 percent, the same for FRL will be around 10-11 percent."
For quick service restaurant (QSR) companies, Edelweiss expects strong SSSG trend to sustain. "For Jubilant Foodworks, we estimate SSSG at around 17 percent YoY (on a base of 6.5 percent), aided by Everyday value offer and impactful ads."
For Wonderla Holidays, it expects slight growth in average revenue per user (ARPU) across parks led by non F&B revenues.
On the margin front, for QSRs, it expects operating leverage to kick in. For companies like Shoppers Stop and ABFRL, pruning off loss making stores will be an added lever for margin expansion, it said. "While sale period was on for most retailers but on the back of strong cost rationalization initiatives, we expect margin expansion to continue."
Edelweiss said it is seeing a positive change in consumer sentiments and pick up in jobs which are aiding growth rates for retail companies. "Coupled with this, we believe that shift from unorganised to organised and mindset change to shop from mall as a culture is getting ingrained."
Retail companies have also learnt the game pretty well and are adopting Click & Mortar as the strategy to reciprocate to threats from online channel, it said.
Its top picks are Shoppers Stop and Future Lifestyle Fashions. It also likes V-Mart and Jubilant Foodworks.
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