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Retail and restaurants to benefit as lockdown eases

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The removal of lockdown restrictions marks a step-by-step approach to restore normalcy and retail and restaurants are expected to benefit from it.
According to a research by Motilal Oswal Securities, this is a good calibrated step towards resumption of the economic engine. After a highly stringent two-month long nationwide lockdown, the government is clearly moving towards a step-by-step approach to restore normalcy, it said.
“Much also depends on the state governments and the local authorities as they have the keys for implementation,” the study said.
While these relaxations would help improve the supply-side situation and potentially defray fixed costs, they would also drive consumption at the margin. However, demand trends in respective categories are the key monitorables, it said.
“We expect the governments (Central and state) to progressively keep relaxing the lockdown norms further,” it added.
There has been a gradual reopening of grocery and apparel stores. Since the last 10 days, most grocery/apparel retailers have started to gradually open stores in green/orange zones, which cater to over 70 percent of locations pan-India.
In many instances, states have granted permission, but the local authorities have restricted store re-openings to curb the risk of crowd gatherings. Also, retailers have been slow in resuming stores by ensuring proper sanitisation, availability of staff/labour and consumer footfall/demand.
Retailers have indicated that they expect 80 percent of stores to reopen over the next 15-20 days. DMart had earlier stated that 50 per cent of its operations were impacted due to the Covid-19 outbreak, which should now improve with operations resuming in majority of its stores.
Malls reopening now largely address the supply-side issues, the report said.
Trent and ABFRL have 38 percent and 20 percent of stores in malls, respectively, which are now allowed to open from June 8. Also, players like Shoppers’ Stop, Marks and Spencer, Lifestyle, H&M, Zara, and Central, which have either more than 70 percent stores in malls or large standalone stores, may see significant benefits.
Thus, barring the containment zones, a large part of the supply-side issues should be resolved.
On the demand side, apparels being a non-discretionary category should take longer to see revenue recovery. Interestingly, few retailers which have resumed operations over the last five days are claiming to have reached 50-60 percent of average daily revenues.
In the current environment, this is a heartening number. With the fragile situation and gradual reopening of operations, apparel retailers believe that full-fledged operations are still far away. Festive demand — four months away — may reflect the proof of the pudding, the report said.
The Government of India through an order dated May 30 has provided a detailed phase-wise opening up of the economy, although the lockdown has been extended till June 30 in the containment areas.
While the Ministry of Home Affairs’ in its detailed notification has done away with the complexity of red, green, orange zones, it would now consider only two zones — containment and non-containment zones.
According to the order, now movement of person and goods would not be restricted outside the containment zones. Most importantly, inter-state movement of personnel and goods without the need for approval/permission has been allowed.

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