Retail business operating profit margins (OPMs), driven by operating leverage benefits, are expected to increase year-over-year by 150 basis points to 8.2%. As a result, the rating agency revised the outlook for the sector from negative to stable.
“Driven by pent-up demand, improving vaccination coverage and a pick-up in economic activity, the retail sector saw a healthy recovery in sales, following the second wave of COVID-19. While operations were temporarily affected by the third wave in January and February 2022, the sector rebounded rapidly in March 2022, said Sakshi Suneja, Vice President and Sector Head, ICRA.
India’s retail sector is expected to surpass pre-pandemic revenue and profit levels in fiscal 2022-23 after two years of below-average financial performance, according to ICRA, whose analysis showed that the retail companies in his sample will see a 12-13% increase in sales year-over-year in FY23 and a 5-6% increase over pre-pandemic levels.#
“As a result, sales recovered up to 90% of pre-COVID levels in fiscal 2022. With footfall exceeding pre-pandemic levels in the first quarter of fiscal 2023, sales entities in CIFAR sample retail is expected to experience revenue growth of 5-6% in fiscal 2023 compared to the pre-COVID period in fiscal 2020,” she said.
“Despite the short-term challenges in terms of inflationary pressures, positives in the form of favorable demographics, rising disposable incomes and low penetration of organized retailing bode well for the outlook for the economy. medium-term industry,” she added.
The level of retail industry rebates remained low in fiscal 2021 and 2022 compared to fiscal 2020 as retailers attempted to protect their gross margins amid declining sales, ICRA said. in a press release.
With footfall and revenue surpassing pre-pandemic levels in FY2023, CIFAR expects the level of discount to increase as retailers compete for a larger share of the consumer’s wallet.
Driven by a buoyant demand outlook and a recovery in footfall, retailers are expected to continue their store expansion plans in fiscal 2023.
Entities in the CIFAR sample are expected to increase capital spending by more than 45% in fiscal 2023, with store additions largely targeted at Tier II and Tier III cities.
Fibre2Fashion (DS) News Desk