Result preview: Subdued festival sales may reflect in Q3 retail numbers

Retail companies are expected to witness a tepid strong same-store sales growth (SSSG) expansion in the third quarter (October – December) of the current financial year (Q3FY24) on the back of subdued sales in the festival season. 

The third quarter of the financial year typically witnesses higher sales since it coincides with the festival season. This time around, weak customer sentiment has dragged down SSSG.

“Growth in retail is largely driven by new store additions with SSSG being a mixed bag. Festival season had been soft with lower-than-expected SSSG for most companies versus their internal expectations,” Dolat Capital wrote in its report.

The domestic brokerage added: “These in turn may impact inventory levels, lead to early EOSS (end-of-season-sales) and thus may impact gross margin in future quarters in our view for the apparel companies.”

On the SSSG trends, it expects Westside to garner around 8 per cent, with Zudio at around 4 per cent, Vmart at 4 per cent on a low base and Dmart at 4 per cent. 

It, however, expects Pantaloons SSSG to enter negative terrain at -3.5 per cent year-on-year (Y-o-Y). “Though the performance of Pantaloons is weak, it is an improvement versus H1FY24 where it reported -16 per cent SSS degrowth,” it said.  

Nuvama Institutional Equities pointed out that while the initial expectations were higher, the quarter did not see any revival in sentiment or demand despite being a festive season.

The brokerage added: “This also poses a larger question on when and how revival will play out given the festive trigger is behind.”

It also expects Trent to sustain its outperformance in the quarter and expects jewellery demand to be stable which remains an exception.

On Titan, Kotak Institutional Equities said: “We expect 19 per cent Y-o-Y growth in the standalone jewellery sales (excluding the sale of gold bullion), led by good festive and wedding purchases, partly impacted by the shift in the inauspicious period ('Shradh') to 3Q this year versus 2Q last year.”

The brokerage also estimated the consolidated revenue growth of 18 per cent Y-o-Y in the October-December quarter for Dmart with the addition of five stores and single-digit SSSG.