Sluggish consumer demand and deferred purchases (to the discount season) led retailers to post lower same-store sales growth during the October-December quarter, even as revenues rose. Companies like Future Retail and Shoppers Stop reported their lowest same-store sales growth in five quarters.
K Raheja's Shoppers Stop witnessed same-store sales growth of 5.5% during the period, down from a whopping 15.5% growth in the preceding quarter. Same-store sales refers to sales of stores that are open for at least a year. It does not include growth coming in from new stores.
However, the company's retail turnover rose 15% in the quarter, while net profit rose 17% to R5 crore from the full-price period. The gross margins had risen 100 basis points.
Definitely, there is a slowdown and that is directly reflected in the like-to-like customer entry degrowth. We have seen both Diwali and Christmas to be slightly slower than last year as slow GDP growth rate does have an impact on consumer sentiment, Govind Shrikhande, MD, Shoppers Stop, said.
In FY13, CPI for industrial wage workers increased 16.4% year-on-year whereas nominal wage grew only 13.8%, thereby resulting in a decline in real incomes, according to a report by India Ratings & Research.
In FY13, the net financial position of Indian households did not change, after having weakened in the previous two years, the ratings agency said.
Inconsistent sales post Diwali led to the company's new fashion company that operates Brand Factory and Planet Sports post same-store sales growth of 7.3%, lower than the 15.2% growth it saw last quarter.
The company said the Central chain of stores also saw growth slump to 8%. Total income from operations for the company rose 7% in the period.
"Muted consumer spending due to prevalent economic uncertainties will likely drag into FY15 and same-store sales growth will taper down for the year," according to India Ratings & Research. Any further efforts by retailers to resort to aggressive discounting could adversely impact margins."
"It has been a challenge maintaining same-store sales in such a scenario. We are maintaining a 10% same-store sales growth," says Jacob John, brand head, Louis Philippe. The brand makes up 30% of Madura Lifestyle and Fashion's total revenues.
Apart from lifestyle retailing, even value retail saw slow sales. For example, Future Retail's value formats that include Big Bazaar and Food Bazaar saw a 3.3% rise in same-store sales, compared to 8% in the previous quarter.
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