Consumer demand grew for companies like Marico and D-Mart in the second quarter. While sales rose, D-Mart shares plunged amid fears of e-commerce competition. Marico said, “Domestic demand remained resilient during the quarter, even as the operating environment stayed volatile through the period.” Other retailers also saw strong growth recently.
Synopsis
Consumer demand gained momentum for companies like Marico and Godrej Consumer Products in the second quarter. Retailers including D-Mart and V-Mart Retail showed strong sales growth, although D-Mart's shares declined significantly. Marico reported a double-digit volume growth, while Godrej tracked revenue growth in the teens despite inflationary risks. Nykaa experienced robust growth in its beauty and fashion segments during the quarter.
Kolkata: Consumer demand gathered some momentum in the second quarter for FMCG companies Marico and Godrej Consumer Products, and retailers such as D-Mart, V-Mart Retail, V2 Retail and Nykaa, although shares of retailer D-Mart’s parent company plunged the most in nearly two years over concerns of increased competition from Web commerce firms and rich valuations.
Nykaa, Marico and V-Mart shares climbed, while V2 Retail shares hurtled to 52-week lows.
Marico Monday said underlying volume growth in the September quarter touched double digits, and consolidated revenue should expand similarly. The FMCG company, however, highlighted inflationary risks.
Godrej Consumer Products too 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. The company said the performance is supported by healthy growth across both personal care and home care.
“Domestic demand remained resilient during the quarter, even as the operating environment stayed volatile through the period,” Marico said. The maker of Parachute and Saffola said it was on track to surpass its near-term guidance across key financial parameters, helped by the sustained strength of its core brands and the scale-up of newer growth engines.
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Marico also expects a sharp year-on-year improvement in gross margin. While prices of crude-linked derivatives have risen, copra prices have remained range bound at around 35% below their peak levels, it said.
Godrej too said the quarter witnessed "renewed inflation" across several key raw-material baskets such as crude-linked derivatives and palm oils.
Retailers also reported a strong quarter. Avenue Supermarts, which operates D-Mart, and V-Mart Retail recorded around 18% year-on-year growth in standalone sales, while V2 Retail expanded sales by more than 28%, despite the festive season starting about a month later this year.
But the Street reaction was mixed. D-Marts shares plunged 6.7%, the most in nearly two years, after two top Wall Street brokerages retained their ‘sell’ rating after the business update, citing competition from e-commerce firms. V 2 Retail stocks plunged more than 16% - the most in more than six years – to a 52-week low, while V-Mart shares climbed nearly 3%.
V-Mart’s same-store sales growth was 3% during the quarter but rose to 11% after adjusting for the shift in festive timing. V2 Retail’s same-store growth increased to 15% on the same adjustment.
Same-store sales growth is closely watched as a measure of underlying consumer demand because it strips out the impact of newly opened stores.
The improvement was also reflected in retailers’ store expansion plans. Unlike last year, when companies were focused on shutting underperforming outlets, store closures moderated in the September quarter. V-Mart opened 23 stores and closed one, while V2 Retail added 49 stores and shut three.
Consumption remained strong in e-commerce as well. FSN E-Commerce Ventures, which operates Nykaa, said consolidated gross merchandise value will grow by nearly 30% year-on-year in the September quarter, while net revenue is expected to rise in the high twenties. Both its beauty and fashion businesses reported robust growth.
“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,” Nykaa said, adding that it remained confident about its underlying growth drivers.
Nykaa shares climbed more than 4%.
The broad-based momentum follows an acceleration in consumer spending during the quarter across categories. ET reported last week that sales of air conditioners, refrigerators, washing machines, FMCG products and branded apparel grew at a double-digit pace or close to it in the September quarter, setting the stage for a strong festive season.
Companies have attributed the growth to a combination of higher volumes and price-led growth, suggesting that consumers have so far remained resilient despite elevated prices and an uncertain inflationary environment.
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