IGI Logo

Retail Sector: Q1FY26 Review

The retail sector reported a mixed set of numbers in Q1FY26, reflecting both resilience and select pressures. Discretionary demand trends were uneven, with the footwear mass and mid-market categories impacted by early monsoon, heightened competitive intensity from unorganised players, and global geopolitical factors. On the other hand, the Quick Service Restaurant (QSR) segment witnessed steady recovery, while value retailers like V-Mart and Avenue Supermarts delivered stronger performance, reiterating the strength of their business models. Premium and luxury formats continued to see healthy traction, though certain pockets of urban discretionary demand remain soft. Despite this challenging backdrop, most retailers in our coverage have stayed consistent with their expansion plans, aggressively targeting smaller towns. Furthermore, EBITDA margins expanded for most players, aided by operational efficiencies, backend optimisation, and strict cost control.

Retail Sector: Outlook

The medium to long-term outlook for Indian retail remains structurally strong. The sector stands to benefit significantly from rapid formalisation, as a majority of the retail market is still unorganised, creating immense opportunity in Tier-2 and Tier-3 towns. Smaller cities are witnessing faster adoption of branded products compared to metros, driven by rising aspirations, higher disposable incomes, and increasing brand penetration across apparel, footwear, and QSR segments. India’s per-capita income at $2,200 offers substantial headroom for discretionary spending, as any incremental income beyond essentials flows toward lifestyle and premium categories. Importantly, the recent GST rate reduction is poised to boost discretionary demand, acting as a near-term tailwind. Higher women’s workforce participation is also accelerating growth in categories like women’s wear. Collectively, these drivers reinforce the long-term retail growth story.

Key Monitorables

Investors should remain watchful of demand recovery trends, management commentary on margin guidance, inflationary trends, and the rising competitive intensity from both organised and unorganised players. These factors will be critical in assessing the sustainability of growth across sub-segments.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633