Mixed Fortunes for India's Retail Sector in Q2FY25: Centrum Report

India's retail sector shows a mix of growth and challenges in Q2FY25. Value retail, jewellery, and luggage sectors report strong growth, while footwear and QSR face demand issues. Operating margins are pressured by costs and promotions, but the sector benefits from trends like organized retail growth and rising incomes.

India's retail sector is experiencing a blend of triumphs and trials in the second quarter of the fiscal year 2025, as detailed in a recent Centrum report. This emerging landscape sees segments like value retail, jewellery, and luggage poised to achieve robust growth. Meanwhile, footwear and quick service restaurant (QSR) sectors find themselves grappling with notable demand hindrances, marred by adverse weather conditions and a decline in out-of-home consumption.

A decline in inflation and a recovery in rural demand have bolstered value apparel retail, which is anticipated to exhibit a 15% same-store sales growth. The jewellery segment similarly forecasts a strong 15% growth, attributed in large part to a substantial customs duty reduction. However, fewer auspicious wedding days have somewhat dampened this sector's overall performance. Despite volatility in gold prices and intensified promotional efforts threatening margins, premiumization and strong consumer demand continue to drive foot traffic.

The luggage industry is set to rebound strongly, spurred by e-commerce, which fuels 50% of sales for major players. Conversely, footwear brands are only expected to show low to mid-single-digit growth due to climatic setbacks and reduced discretionary spending. As Metro Brands capitalizes on store expansion, competitors like Bata and Relaxo may experience sagging revenue. The QSR sector remains subdued, facing fierce competition and heightened costs, resulting in pressured operating margins. Nevertheless, the sector enjoys a positive outlook, benefiting from the shift to organized retail and increasing consumer preferences for premium offerings.

(With inputs from agencies.)