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The reach ramp-up imperative
Key messages
The organised retail sector* poised for 15-16% growth this fiscal, led by higher volume and increasing penetration
- Revenue of brick & mortal (B&M) retailers seen growing 13-14%, driven by continued expansion across segments
- Growth of the e-retail segment will normalise at 20-22%, with consumers striking a balance between online and in-store shopping
- Growth to be mainly volume-driven, with easing inflation limiting material price hikes
Operating margin to remain rangebound this fiscal; benefit of moderation in raw material prices offset by increased competition
- Margins of food & grocery (F&G) retailers to fall 40-50 basis points (bps) due to increasing competition from e-retailers
- Apparel retailers to see flat operating margins as benefit of lower cotton prices will be offset by higher discounting to support demand
- Profitability of consumer durable retailers to increase 100 bps due to better operating leverage
Capex intensity to be largely in line with last fiscal; B&M retailers to continue capex to gain share
- Pace of area addition in the F&G segment to moderate with focus on expansion in Tier 2/3 cities through smaller stores
- New area addition to normalise in apparel
- Expansion in consumer durables to continue at current pace
Credit outlook for retailers to remain ‘Stable’
- F&G retailers will continue to have low leverage and resilient profitability
- Apparel retailers to benefit from prudent debt-funded expansion and timely equity raise
- Strong sponsor backing for consumer durable and apparel retailers to support their credit risk profiles
Key monitorables:
- Sustainability of demand, commodity trends and inflation, impact of unseasonal rains on purchasing power
Analytica