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Q4FY21 Result Preview - Retail - ICICI Direct

Posted On: 2021-04-07 08:26:14 (Time Zone: Arizona, USA)

Improved consumer sentiments and festive boost enabled retail players to witness ~70-80% revenue recovery rate in Q3FY21. While January continued to witness decent demand offtake, rise in number of Covid cases and several restrictions in March, hampered growth aspirations of retail companies. On an adjusted base of Q4FY20 (normalised), average recovery rate for apparel retailers is expected to be in the range of 80-85%. We expect categories like jewellery, open footwear, athleisure wear, kitchen appliances to sustain healthy growth trajectory compared to apparels and other accessories. Rise in key commodity prices such as cotton/polyester yarn and aluminium would exert pressure on gross margins in Q4FY21E. However, cost rationalisation measures are expected to offset the negative impact, to a certain extent. Retail companies have stepped up their digital investments and are integrating online and offline channels to capture demand. Hence, they are better placed to withstand pandemic challenges than earlier.

Titan, Page, TTK to post strong revenue growth

Among discretionary categories, we expect Titan's jewellery division to report robust revenue growth of 70% YoY in Q4FY21E (supported by benign base and large B2B order of gold coins). Revenue growth (excluding B2B sale) for Jan-Feb stood at healthy ~ 32%. Wedding jewellery has been the key growth driver during the quarter, coupled with softening of gold prices (6% QoQ) boosting demand. Titan's watches and wearable division is expected to report constant growth YoY in Q4FY21E. We expect Titan to report overall sales growth of 58% YoY in Q4FY21E. For Avenue Supermarts, certain home usage categories like apparel, footwear and travel were still not completely out of the woods, which has been a drag on its SSSG (January-February: ~6%). Also, localised restrictions on store operations resulted in SSSG for two year and older stores to decline 9.4% in the first 15 days of March. The company has accelerated store addition pace in Q4 by adding 13 D-Mart stores. Hence, we expect it to report 18% sales growth in Q4FY21E. Among lifestyle players, we expect Trent to outperform with sales growth of 12% in Q4FY21 (on an adjusted base recovery rate expected at ~90%). ABFRL is expected to report marginal sales growth of 1% (85% adjusted recovery rate) with addition of three Pantaloons stores. Business momentum in kitchen appliances segment continues to be healthy on the back of increased work from home trend and accentuated preference for home cooked food. On a low base of Q4FY20 (revenue de-growth of 21%) we expect TTK to report 35% revenue growth in Q4FY21E. Driven by strong demand for WFH athleisure wear & womenswear we expect Page to report healthy sales growth in Q4FY21.

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Source: Equity Bulls

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