Indian retail sector to witness accelerated earnings growth, say analysts

05 July 2022, Mumbai:

Indian retail sector is likely to witness accelerated earnings growth despite rising inflation as consumer sentiments and discretionary purchases bounce back from COVID-19 pandemic.

Sector growth will be boosted by a shift in consumer preferences from unorganized to organized sector coupled with rising domestic demand, says Nishit Master, Portfolio Manager, Axis Securities.

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Mall footfalls Tier II cities and standalone stores are growing with increasing consumption levels. Retailers are also expanding stores as sales recover to pre-pandemic levels. Aditya Birla Fashion and Retail (ABFRL) plans to set up around 400 stores in their 'Lifestyle' format while Shoppers Stop plans to set up 12 to 13 new department stores. Analysts at Phillip Capital opine, mall-based retailers like Shoppers Stop and Pantaloons could grow relatively faster in the first half of FY23.

Gaurav Dua, Head-Capital Market Strategy, Sharekhan - BNP Paribas, says, domestic players like Trent, ABFRL, and Bata India will perform well in the coming quarters driven by strong domestic demand. However, Indian retailers will continue to remain pressured by a rise in freight and power costs due to increase in crude oil prices and disruptions in supply chain dynamics, adds Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

To offset margin pressure emerging from high input costs and inflation, companies like Westlife Development, V-Mart Retail, and Devyani International hiked prices in the range of 6 to 11 per cent in April 2022.

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