Demand for lifestyle products, apparel and shoes is still subdued in smaller towns due to overall inflation, forcing a few retailers to scale down store opening guidance in tier-2 and tier-3 markets. This also comes amid sluggish sales growth for discretionary products in cities.
“There’s definitely more supply in value retail space in tier-2, tier-3 towns compared to the pre-Covid days,” Lalit Agarwal, chairman of hypermarket chain V-Mart, told analysts. “We saw a lot of new stores getting built up in the last three years and almost 50%-60% additional number of stores got built by us as well as by the competitors. The demand definitely did not grow as per expectation.”
Unlike earlier slowdown in the value segment, Aditya Birla Fashion and Retail (ABFRL) saw growth tapering off across segments in the January-March quarter. Retail expansion guidance in Pantaloons has also been moderated to 40-50 stores compared to 60-70 earlier due to demand slowdown in small cities. ABFRL, however, is hoping for sentiment to improve by the festive period this year.
“At this point of time, we want to acknowledge the reality that is facing the business for the last couple of quarters and the softness that we continue to experience, particularly in smaller towns and that’s the part of expansion that we want to slow down a little bit,” Ashish Dikshit, managing director of ABFRL told investors.
Most apparel and lifestyle retailers increased prices across categories over the past year, especially after cotton prices surged due to higher shipment costs and rupee depreciation. Now companies are hoping the trend would reverse.
“While January-March quarter was slow, offtake improved slightly in April and this month, the performance was even better. So, we are expecting some recovery every month with lower prices,” said Satyen Momaya, CEO of French apparel brand Celio.
Sales of lifestyle, apparel and discretionary products moderated for the second consecutive month to 6% in April due to a high base a year ago. While retail sales grew in strong double digits consistently over the past year, the growth slowed down to 6% in both March and April, according to the Retailers Association of India (RAI), indicating slowest sales expansion in more than 14 months.