Continued weakness in consumer discretionary spending will lead to lacklustre growth of Indian retailers like Pantaloon Retail India, Shoppers Stop and Tata’s Trent in 2013, India Ratings, a unit of Fitch, said while maintaining a ?negative? rating on the retail sector.
Private final consumption expenditure (PFCE) is at an eight-year low, with the last six quarters witnessing the four lowest growth rate observations in the last 34 quarters.
?PFCE can bounce back if companies have robust earnings, wage hike and low consumer inflation. But this is not too likely this year,? said the firm?s director-corporates, Deep Mukherjee.
On the basis of profitability levels in 2012 and the expected levels in 2013, salary hikes are likely to be muted in 2013.
It also warned that consumers in India will no longer be able to keep spending the way they have been doing in the immediate past as prices are going up and salaries are only growing very marginally.
The retail sector, which experienced overall single digit revenue growth in 2012 for the first time in its history, is likely to grow at 3-8% in 2013.
Analysts say that while Shoppers Stop will grow in early double digit and PRIL will manage a late single digit, Trent’s revenue may not grow more than 2%.
Also, profit margins of major retailers may contract by 50-75 bps, as they rush to offer heavy discounts and offers.
