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ICICI Direct Report
As per our channel checks, demand for the lifestyle segment started waning off during January-February as pent-up demand for discretionary spending reduced. Also, owing to higher inflation, consumers' share of wallet towards discretionary appears to have declined (mainly in non-tier I cities).
We expect Titan Cmpany Ltd., Trent Ltd. to buck the current trend owing to continued momentum in network expansion. Among categories, value fashion continues to be the most impacted with softer performance expected in V-Mart Retail Ltd. and Pantaloons (Aditya Birla Fashion and Retail Ltd.).
On a favorable base, we expect our retail coverage universe to report revenue growth of 21% in Q4 FY23 (down 14% QoQ). Ebitda margins are expected to remain under pressure mainly on account of higher operating expenses on the back of new store opening and investments in marketing spends.
Hence, we anticipate Ebitda margins to decline 120 basis points YoY to 10.4%. Despite a challenging environment, retailers continued calibrated expansion of their store network with opening of 9 V-Mart stores, 31 jewelry stores of Titan, 52 Titan watches and wearable stores, 38 Zudio stores, 35 plus Bata India Ltd.'s franchise stores and four DMart stores.
The management's commentary on demand trends for spring summer 2023 and healthy wedding season would be a critical factor to watch.
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