It's Trent Trending As Nykaa, Titan, And Dmart Follow, Indicates Morgan Stanley Report

Morgan Stanley’s retail check for the September quarter has highlighted varying demand trends across key players in the Indian retail market.

According to the analysis, Westside and Zudio handler, Trent is leading the pack, outperforming peers in terms of demand trends. The company showed robust performance with double-digit like-for-like growth and a 40% year-on-year revenue increase, although it missed analyst expectations slightly. 

Following Trent, Nykaa posted a more modest growth trajectory, with its fashion segment showing a 10% YoY increase in gross merchandise value, far below its typical average of 26% growth in the past four quarters.

Titan Co., benefiting from strong gold demand post the government’s customs duty cut, witnessed a 24% YoY growth in domestic revenue. However, the retail space for jewellery has become increasingly competitive, impacting margins. 

In the grocery segment, DMart operator Avenue Supermarts Ltd. reported a 14% YoY increase in sales, with like-for-like growth slowing to 5.5%, down from 9.1% in the previous quarter, largely due to intensifying competition from online grocery formats.

Looking ahead, companies remain optimistic about the second half of financial year 2025, anticipating a significant surge in demand driven by the festive season and a strong wedding calendar.

Retailers are expecting a boost in consumer spending, especially in the jewellery and apparel segments, as the festive season ramps up.

The wedding calendar, with a higher number of auspicious dates in the second half of the fiscal (45 versus 42 in H2 of FY24), is also expected to drive substantial demand, especially in the jewellery and ethnic wear sectors.

Companies have also reiterated their expansion plans, with many targeting tier 1 and tier 2 markets, as well as larger stores, in preparation for increased demand. Store additions are expected to be skewed towards the second half of the fiscal, aligning with the anticipated demand surge.

The demand recovery is not uniform across all regions, according to the note. While tier 1 cities such as Mumbai, Delhi, and Bangalore remain key contributors to retail sales, the growth trends in tier 2, 3, and 4 cities have been more pronounced.

According to Phoenix Mills’ disclosures, consumption in tier 1 markets grew by 130% YoY in the second quarter, up from 126% in the first quarter, while tier 2 and 3 cities showed a 108% YoY growth in the second quarter, compared to 98% in the previous quarter. 

The growing accessibility of retail in these regions is further amplified by the ongoing trend of value formats performing better than premium segments, although the gap between the two has narrowed sequentially, according to the brokerage. 

While tier 1 cities continue to dominate, the rapid growth in demand from tier 2, 3, and 4 markets is shaping the retail landscape, with companies increasingly focusing on these regions.

As retailers gear up for the festive season and the wedding boom, their expectations for a strong second half for the fiscal remain high, supported by expanded store networks, a favourable calendar, and improved demand trends across various categories.