Resilient Rural Demand and Festive Season to Boost Retail Growth in 2QFY25

A report by Systematix Institutional Equities highlights a mixed demand recovery in 2QFY25. Rural demand improved slightly, although urban areas saw stagnant consumption. Seasonal factors affected growth, but strong apparel and jewelry sales provided some support. The festive period is expected to further uplift retail performance.

In an insightful report by Systematix Institutional Equities, the consumer demand recovery that initiated in October is now fueling optimism for a robust second half of FY25.

Despite a slight increase in rural consumption, urban demand remained stagnant, contributing to tepid growth in the second quarter of the fiscal year.

The quarter's demand trends mirrored a subdued market, similar to the prior quarter, hindered by seasonal elements such as monsoons and religious observances, namely 'Shravan' and 'Shraadh.'

The retail sector, specifically apparel, showed considerable variation in outcomes. While value fashion sustained strong demand, reporting notable revenue and same-store sales growth, the apparel industry is focusing on store rationalization to bolster margins.

However, net store additions are predicted to stay minimal through the year's remainder.

In contrast, the jewelry market exhibited solid revenue increments in 2QFY25, spurred by diminished customs duties that revitalized demand.

Despite this, margins faced pressure from heavy discounting, especially in studded jewelry, and escalating competition.

The reduction in customs charges resulted in inventory losses for numerous players; yet, an increase in gold prices slightly ameliorated these deficits.

Anticipated heavy wedding season and festive expenditures in 3QFY25 are set to further bolster sales, providing much-needed optimism for the year ahead.

Challenges were also observed in the food and beverage industry, where online platforms and local competition diluted dine-in demand.

This decline prompted QSR brands to introduce customer promotions and cost-effective offerings to stimulate interest.

Meanwhile, the travel sector posted moderate growth during this traditionally low peak quarter, as travel and hospitality gained from consistent growth, particularly in forex business.

Nonetheless, a slight downturn was noticed in the DEI business revenue, especially in both domestic and international events.

(With inputs from agencies.)