New Delhi, April 3 Many lifestyle companies are experiencing softness in demand across product categories, Motilal Oswal Financial Services said.
Stores witnessed the liquidation of old, piled-up inventories, and companies have introduced fresh summer collections.
January has been soft, but February was slightly better, benefiting from the wedding season and partly from the extended winter season. Further, the management expects March to be better, due to Holi and Eid celebrations, coupled with election spending. End-of-season sales (EOSS) continued for the same timeframe compared to the previous year, the brokerage said. Ethnic companies are experiencing a subdued demand environment as the quarter sees fewer weddings despite having more wedding dates available. Metro/Tier 1 cities/towns continue to outperform Tier 2/3 locations.
Despite the subdued environment, companies continue to add stores at 10-15 per cent rate. Traditionally, the last quarter tends to be robust for retailers in terms of store expansions. “We anticipate continued store additions for all players in our coverage. However, V-Mart is expected to close down some of its loss-making stores, potentially resulting in a net closure for the company in 4QFY24,” Motilal Oswal Financial Services said.
Raw material costs have broadly stabilised and some companies have already passed on these costs to customers by implementing price cuts in previous quarters. In the current quarter, we do not expect any major price cuts by companies. With old piled-up inventories nearly cleared, companies have rolled out fresh summer collections. The combined benefits of price cuts and RM moderation could support demand recovery over the next two to three quarters, the brokerage added.
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