Retail industry, jewellery, apparel, QSR Companies, Titan, Trent, Nykaa, Sapphire foods: The retail sector reported an in-line performance during the July-September quarter earnings for the financial year 2022-23 (Q2FY23), Nuvama Institutional Equities said in a report, while decoding the detailed performance of the sector that includes jewellery, QSR, apparel and fashion among others.

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Jewellery Segment

The outperformance seen in the first quarter of FY23 continued in the case of Titan as it reported revenues above estimates and clocked a margin beat, delivering a 15 per cent margin growth in jewellery. The top-line growth was robust as it grew by 22 per cent year-on-year (YoY).

QSRs (Quick Service Restaurants) Segment

All QSRs saw their revenues staying above pre-covid levels, however, raw material inflation led to a dent in their gross margins. All QSRs highlighted raw material prices easing from their peaks. Dine-in-focused QSRs continued to outperform. Even for Pizza Hut, the format under Sapphire deliver higher SSSG (Single Store Sales Growth) on dine-in recovery.

Apparel Retail, Innerwear Segment

Apparel and innerwear companies continued their strong performance, however, with expenses normalising, margins have taken a slight hit. Most companies have seen an increase in inventory as they stock up for the upcoming festive season. Store expansion in the quarter sustains for all players.

Outlook

Q2FY23 managed to meet expectations, wherein recovery has sustained in metro/tier 1 cities, whereas demand still remains muted in non-metro/rural, the brokerage said, adding that the signs of demand have been mixed amid a strong festive season this year.

It added that any significant deceleration will have a bearing on valuations, which are close to their peaks across players.

Top picks:

Trent – Traction in growth driven by Zudio and strong guidance for Westside

Titan – Massive market share opportunity ahead

Sapphire Foods – Compelling valuations

Nykaa – Positive unit economics along with growth opportunity.

Cautious:

Avenue Supermarts – Growth is normalising, putting valuations in questions

Page Industries – High growth ask post FY23