Some companies may face margin pressures, but analysts expect a significant jump in profit and revenue
Analysts expect retailers to report a significant jump in revenue and profit in the January to March quarter, thanks to a surge in consumer spending.
However, many analysts expect profit at the largest retailer, Pantaloon Retail (India
Sangeeta Tripathi, who tracks retail companies for Sharekhan Ltd, said she is “bullish” on revenue as there has been a rise in shoppers. However, net income may be a mixed bag--high profit of 37% for Titan Industries Ltd to a possible 16% decline in the same measure for Pantaloon.
“There will be pressure on Pantaloon's margins and higher interest cost will impact its profitability”, Tripathi said, adding that interest outgo on debt for the quarter was `100 crore.
Sharekhan expects Pantaloon's revenue to jump 32% to `2,712 crore from the year earlier, while profit will shrink to `47 crore from `55.8 crore.
Sharekhan expects the second largest listed retailer, Shoppers Stop Ltd, to maintain momentum on sales and margins.
Sharekhan expects the second largest listed retailer, Shoppers Stop Ltd, to maintain momentum on sales and margins.
Tripathi expects Shoppers Stop's sales to rise 20.9% to `460.7 crore and profit to swell 23.6% to `15.7 crore. “Shoppers Stop doesn't have debt on its balance sheet and it's a clean book,“ she said. Therefore, what- ever margins the company earns will be reflected in the profitabil- ity, she said.
Retailers are expected to re- port positive numbers on revenue, said Vijay Chugh, director, research, at Mumbai-based Ambit Capital. He expects Pantaloon to report a 41% increase in sales and flat profit. “There is a challenge on margins and gross margin will decline”.
Sastha Gudalore, a retail analyst for Alchemy Share and Stock Brokers Pvt. Ltd, said Pantaloon will see margin pres- sure on both its food and fashion businesses. He said the firm has absorbed some input costs, including rising cotton prices, rather than passing them on.
Cotton prices nearly doubled to `54,500 per bale over the last year, according to the National Commodity and Derivatives Exchange Ltd.
On the other hand, Pantaloon's food business has been facing competition from other retailers including D-Mart and Star Bazaar, among others, ac- cording to Alchemy Share. “They have been targeting 30% revenue growth and in order to achieve that growth you have to remain competitive in your pricing”, Gudalore said. “So, I would guess they had tried to remain rather competitive on the pricing, which would have resulted in lower gross margin on the food side as well”.
ICICI Securities Ltd expects retailers including Pantaloon, Shoppers Stop and Titan to post a 36% revenue increase in the latest quarter on “buoyant demand“ from consumers that led to healthy 15-20% same-store growth, a yardstick to gauge sales growth for stores that exist- ed for a year or more.
“We expect marginal pressure on the operating margin of Pantaloon Retail and Shoppers Stop on the back of rising input costs and also (due to) loss-making businesses (Home Town and HyperCity)”, ICICI Securities said in its latest report.
It expects Titan to report 1.8 percentage point margin expansion to 9.8%, riding on in- creased sales in studded jewellery and with the launch of premium watches.
It forecasts Pantaloon will re- port a 38% rise in revenue to `2,856 crore and profit after tax to decline to `54.7 crore from `55.8 crore. It expects Shoppers Stop's revenue to increase 87% to `714 crore and profit to swell 47% to `18.6 crore.
(Source-: livemint)