The country’s largest organised retailer, Reliance Retail, may be back on the growth path in the third quarter of the current financial year backed by festive demand, sector analysts said. Parent Reliance Industries (RIL) is set to declare its financial results on January 16.
In the result preview ahead of RIL’s earnings next week, global brokerages such as Goldman Sachs, Bernstein and CLSA have said that the period of consolidation for Reliance Retail has concluded in the first half of FY25. This period of consolidation was marked by muted store launches and a focus on improving profitability, experts said.
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“The retail business should return to its growth trajectory in the second half of FY25 backed by festive demand in Q3,” CLSA said in a note on RIL this week.
In its preview on RIL, released Thursday, Goldman Sachs said that it saw discretionary spends turning positive in the October-December 2024 period, which would aid retailers such as Reliance.
“We have seen improvement in trends across discretionary consumption companies in our coverage. The same-store sales growth (SSG) trend has begun improving for quick-service restaurants (QSRs) and there is an improvement in like-for-like growth for jewellery players. Hence, we expect improvement in the year-on-year sales growth for Reliance Retail in Q3,” Goldman Sachs said.
In its outlook on Reliance for FY25, released Tuesday, Bernstein said that it expected mid-single-digit sales growth in FY25 in the retail business, starting with the third quarter, which may see an uptick, led by festive demand in apparels and electronics.
Goldman Sachs expects a 5% year-on-year sales growth for Reliance Retail in Q3. In Q2, Reliance Retail had reported a 3.5% decline in topline. In Q1, the organised retailer had reported a 6.6% topline growth, driven mainly by sales of cooling category products.
Earnings before interest, tax, depreciation and amortisation (Ebitda) may grow at 3% year-on-year in Q3, Goldman Sachs said. In Q2, Reliance Retail had reported a 1% rise in Ebitda. While in Q1, the retailer had reported a 11.5% increase in Ebitda, driven by demand in cooling products and TVs.
Sector analysts also expect Reliance Retail to maintain a cautious store addition strategy in Q3 in keeping with the trend of rationalizing costs.
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