Indian Retail Quarterly Results Show Growth

Indian FMCG and retail companies reported double-digit underlying volume growth and resilient consumer demand in the September 2024 quarter despite inflationary pressures and trade inventory corrections. Godrej Consumer Products said its standalone business will deliver revenue growth in the teens and high-single-digit underlying volume growth, despite an estimated impact of approximately 100-150 basis points from trade inventory correction. Marico reported that underlying volume growth touched double digits, with consolidated revenue expected to expand similarly.

Companies attributed the growth to a combination of higher volumes and price-led increases. This suggests consumers have remained resilient despite elevated prices. Marico highlighted inflationary risks but said it was on track to surpass its near-term guidance. Godrej Consumer Products noted 'renewed inflation' across key raw-material baskets like crude-linked derivatives and palm oils. Its performance was supported by healthy growth across both personal care and home care segments. Marico expects a sharp year-on-year improvement in gross margin, noting prices of crude-linked derivatives have risen while copra prices remain around 35% below peak levels.

Festive timing shifts growth between quarters

Several companies noted that a later start to the festive season moved growth from the second quarter to the third, affecting quarterly comparisons. V2 Retail expanded sales by more than 28% despite the festive season starting about a month later this year. Nykaa stated the shift explicitly. "With a larger part of the festive season falling in Q3 this year, some of the festive-led growth has shifted from Q2 to Q3," the company said, adding it remained confident in its underlying growth drivers. Store closures, a focus last year, moderated in the September quarter.

Same-store sales reveal underlying demand trends

Same-store sales growth, a key measure of organic demand that strips out new store impact, varied across retailers. V-Mart’s reported same-store sales growth was 3% for the quarter, but this rose to 11% after adjusting for the shift in festive timing. V2 Retail’s same-store growth increased to 15% on the same adjustment.

Share prices diverge on growth outlook and competition fears

Market reaction to the business updates was sharply divided. D-Mart's shares plunged 6.7%, their largest drop in nearly two years. This followed two top Wall Street brokerages retaining their 'sell' rating, citing competition from e-commerce firms and rich valuations. V2 Retail stocks plunged more than 16%, the most in over six years, to a 52-week low. In contrast, shares of V-Mart climbed nearly 3%, and Nykaa shares climbed more than 4%. Sales of products like appliances, FMCG goods, and apparel grew at a double-digit pace or close to it in the quarter, setting the stage for a strong festive season.

Nykaa and V2 Retail show strong topline expansion

Nykaa and V2 Retail posted significant sales expansion. Nykaa experienced robust growth in its beauty and fashion segments. The company said consolidated gross merchandise value will grow by nearly 30% year-on-year, with net revenue expected to rise in the high twenties. Avenue Supermarts, which operates D-Mart, and V-Mart Retail each recorded around 18% year-on-year growth in standalone sales. V2 Retail expanded sales by over 28% despite the delayed festive season.

Physical retail expansion continued. V2 Retail added 49 stores and shut three, while V-Mart opened 23 stores and closed one.