Quarterly results preview: Retailers may post an average of 15.4% growth
Four major retailers are expected to post an average of 15.4 per cent annual growth in net sales for the quarter ended December, besides a 41.6 per cent rise in Ebitda (earnings before interest, tax, depreciation and amortisation). Their earnings for the quarter have the advantage of a favourable base, as the quarter a year before saw a hit due to demonetisation. Though the quarter was impacted by an early onset of the festive season (in the September quarter), there was a pick-up in sales in November, owing to the wedding season. A dip in demand in early December was offset by an early end of season sale (EOSS) starting December 22. “We expect the accelerating shift to the formal economy post GST (goods and services tax) to bode well for the retail sector,” said domestic brokerage Emkay in a preview report. “We maintain our positive stance on the sector, underpinned by rising urban consumption and expectation of an improving consumer sentiment.” The highest valued is Avenue Supermarts (D-Mart). It is expected to have a seasonally strong quarter, with sequential revenue growth expectation of 21 per cent, aided by festive season demand for food and general merchandise products. “We expect steady post-GST gross margins of 16 per cent and higher revenue throughput to drive 40 basis points sequential Ebitda margin expansion,” said Kotak Securities in its earning preview for the company. On an annual basis, the company is expected to record a nearly 28 per cent rise in net sales and 80 basis points annual Ebitda expansion. Future Retail is expected to have 10 per cent annual same-store-sales-growth (SSSG) in the December quarter, aided by Big Bazaar (75-78 per cent of revenue) and Easy Day (10-14 per cent of revenue).
Heritage stores will further boost revenue. However, demerger from Home Retail (revenue contribution from Hometown) will offset for any increase in revenue from Heritage.