RETAIL & QSR

Retailers

and quick service restaurants (QSRS) will not only see their businesses take a hit, but the threat of a reduction in consumer discretionary spending is also looming large.

Baring a couple, most are seen reporting a loss or a decline in profit in the March quarter. Experts estimate a sharp decline in FY21 growth rates, as recovery is expected only after December.

For retailers, the impact would vary depending on products and distribution mix. “Retailers of non-essential products would see a bigger impact as a recovery in discretionary demand would take at least six months after the lifting of the lockdown,” says G Chokkalingam, founder & managing director of Equinomics Research & Advisory Services.

Edelweiss Securities, thus, has cut its FY21 revenue estimates by 4-7 per cent for food and grocery retailers (essentials), such as Avenue Supermarts and Future

Retail, and by a sharper 16-24 per cent for others. QSRS may see some support from online distribution and relatively fast recovery. But, given the high fixed costs, the impact on earnings of retailers and QSRS could be much larger. While analysts believe large companies may renegotiate lease rentals, the extent of benefit is unknown. Leverage and promoter pledging (Future Retail and Future Lifestyle) are other concerns. According to an Edelweiss report, their (Future group companies and Aditya Birla Fashion) gross debt to operating profit ratio was over two times, according to the April-september 2019 numbers.