New Delhi : According to brokerage ICICI Securities, retailers are expected to report strong results for Q1FY23 as consumers resume spending on non-essential items while increasing demand for items like apparel and jewellery.
“We expect companies in our retail coverage universe to deliver a strong performance in Q1FY23 (the only non-disrupted quarter in the past two years),” analysts at the brokerage said in a note issued on July 7.
Several retailers reported a sharp recovery in the months after April. Companies also started a round of price hikes to counter high inflation.
“As per our channel check, fashion retailers, on a per store basis, have reported recovery rates in the range of 110% of pre-Covid levels. The optimism was driven by improved consumer sentiments, wardrobe refreshes and increased spending on discretionary purchases as the share of consumer wallets on non-essentials remained low over the past two years,” they said in their report.
Meanwhile, the fashion lifestyle retailers built up healthy inventory in the fourth quarter of last fiscal after nearly two years of buying lows during the summer season. “On a favorable basis for Q1FY22, we expect revenue to more than double for our companies in our coverage universe,” he said.
Meanwhile, apparel retailers have hiked prices by 15-20%. Consequently, ICICI analysts expect EBITDA margin to improve 80 bps quarter-on-quarter to 12.3% in Q1FY23E.
During the quarter, top retailers also continued to expand stores. Retailer D-Mart opened 10 stores, Tanishq opened 19 stores, Titan iCare added 56 stores, Westside three stores and V-Mart 11.
In its June quarter update earlier this week- Titan Co Ltd said its Q1FY23 was “close to normal” in the first quarter after a gap of two years. “Sales in QIFY23 grew 205% year-on-year on a low basis and witnessed a three-year CAGR of 20.5% as compared to Q1FY20, the only non-disrupted first quarter in the last three years,” the watch and jewelery retailer reported. said in its earnings update on July.