The Indian Express (Delhi Edition)
Demand tepid, FMCG & retail firms see muted Sept quarter
IT’S BEEN a dull second quarter fortheearlybirdsinthefastmovingconsumergoods(fmcg) and retail spaces, with revenue growth muted amid tepid consumer demand and a delayed festive season. Companies have takenpriceincreaseswherepossible and reined in costs to try and expand margins.
Revenues at Hindustan Unilevergrewbyjust3.6% y-o-y intheseptemberquarteronthe back of a volume increase of 2%, the slowest in the last six quarters. Itc’srevenueswereupjust 2.6% y-o-y while at Shoppers Stop, sales were virtually flat.
Foods major Nestle posted a 9.5% increase in revenue y-o-y. Managing director Suresh Narayanan said domestic revenues had gone up by 10.3%, thanks to a mix of volume and price increases. Nestle’s operating profit margins expanded by 250 basis points y-o-y.
On the whole, management commentary has been circumspect. Kavindra Mishra, ED and CEO, Shoppersstoptoldanalysts the slowdown in the consumer discretionary space, post last Diwali, had continued intoq2 as well with the demand being impactedbyadhikmaasandthedelayed festival season. “The demand environment remains weakacrosscities, townsandcategories unlike in earlier quarters whereitwasdrivenmorebynonmetroandrural,” Mishrasaid.
Rohit Jawa, MD & CEO, HUL, said the firm was cautiously optimistic.“fmcgdemandislikely to continue a gradual recovery withtailwindsfromtheupcoming festive season, sustained buoyancyofservicesandgovernment’sthrustoncapex,” hesaid.
Jawa cautioned the volatile commoditypricesandtheimpact of the monsoon on crop output need to be watched. Operating profit margins at HUL increased by130bpswhilenetprofitsgrew by just 3.8% y-o-y in Q2FY24.
Analysts highlighted weak rural demandandintensecompetition asfactorsthatimpactedrevenues.
At Avenue Supermarts, revenues rose 18.5% y-o-y, much of which was led by an addition in areaofabout12% y-o-yandsome improvementinsamestoresales.
Nevillenoronha, CEO& managing director, Avenue Supermarts said the company’s gross margins continued to be lower than in Q2FY23 due to a smaller contribution from the highermargingeneralmerchandiseandapparelbusinesses.net profits were down by 9% thanks tohighertaxexpenseswhileoperating margins were down by about 50 bps y-o-y. At United Breweries, profitsweredownby nearly 20% y-o-y though revenues were up 14.2% y-o-y.