Retail - Q2FY21 Result Preview - ICICI Securities

Q2FY21 has seen the opening up of the economy with phase-wise relaxation on re-opening of standalone retail outlets and malls across the country. Post lockdown relaxations, stores have reopened gradually. However, operational hours were restricted due to local lockdowns that continued to hamper business operations. In our retail coverage universe, around 80-90% of stores have resumed operations. As per our channel checks, while high street stores (standalone) have seen faster recovery (~45-50% of pre-Covid levels), malls continue to be laggards owing to lower footfalls (<30%). Online sales have gained robust traction with sales tracking 100%+ pre-Covid levels, supported by low base. In the apparel category, athleisurewear and innerwear performed significantly better with sales reaching 90%+ of pre-Covid levels by August. Kitchen appliances and cookware categories also witnessed healthy traction as majority households were without domestic help and preferred home cooked food. Majority of branded players have refrained from steep discounts owing to inventory of fresh merchandise. We expect companies in our retail universe to report a revenue decline of 17% YoY in Q2FY21E (up 87% QoQ), with Titan, Page Industries and TTK Prestige expected to perform relatively better in the discretionary space. While majority of the companies reported EBITDA losses in the previous quarter, significant cost rationalisations measures and partial revenue recovery are expected to aid profitability in Q2FY21E.

Store expansion remains calibrated

Companies with a comparatively healthy balance sheets have continued to add stores despite the current challenging scenario. For instance, Titan has added 14 Tanishq stores in H1FY21 while Trent added ~ 25 Zudio stores in H1FY21. With the upcoming festive season, store addition pace could witness accelerated momentum depending on the demand trend.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Retail_Q2FY21.pdf

Source : Equity Bulls

Keywords