Domestic retailers are expected to see muted sales in the wake of the lockdown and the recovery is likely to be gradual as it will depend on consumers’ income, according to a report. The retailers would have to cut back their discretionary spends and expansion plans, which include store additions in the near term, as focus shifts to business continuity, said a report by IIFL Securities.
“We expect the recovery to be gradual, as the income impact on consumers weighs on the pace of recovery,” the report said.
Moreover, cash flow concerns are likely to emerge for smaller peers, as the period of reduced operations elongate.
“This is likely to result in higher discounting in April/May as smaller peers rush to liquidate inventory during the recovery,” it said adding that “we expect apparel players to have moderate launches in this season and focus on reducing inventory obsolescence risk”.
Further, rentals are being renegotiated with landlords and some are approaching the government for assistance on employee costs.
It further added that omnichannel, e-commerce and food delivery is moderating the impact on apparel and quick service restaurant retailers to some extent.
The focus of larger players is likely to be on ensuring that supply chain is ready with new-season launches so as to benefit from potential demand recovery in the second half.
The retail industry is one of the worst hit amid the lockdown.
“We expect Indian retailers to see muted sales, given the recent 21-day lockdown announced by the Government of India and the 60-80 per cent sales decline (as suggested by our industry checks) in the initial week of March,” said IIFL Securities.
To prevent spread of Covid-19, the government on Tuesday announced a three-week lockdown.