Retail sales slow down in June as consumers tighten purse strings

Retailers in the country reported a 13% increase in sales last month from pre-pandemic June 2019, a slower growth rate than the previous two months, kindling fears that a gradual cutting down of discretionary spending by consumers may impact festive sales.

Headwinds of inflation on consumer spending are still a worry and may impact the upcoming festive fervour, Retailers Association of India (RAI) has said.

"While June 2022 has witnessed growth as compared to the same period before the pandemic, the rate of growth has definitely slowed down," said Kumar Rajagopalan, chief executive of RAI. "Many retailers have indicated that the second half of June was not very encouraging as there weren't too many celebratory occasions such as weddings to drive sales," he said.

"We will have to wait and watch how the next two months will pan out," Rajagopalan said.

As per RAI, retailers saw 23% and 24% revenue growth in April and May, respectively, compared to 2019 levels. Some trade insiders, however, attributed slower sales growth in June to the late start of EOSS, or end-of-season sale, this year.

EOSS used to start by mid-June, but since many retailers were reporting good sales at full price, they postponed the sales this year. This, in turn, affected sales last month, they said.

"The sales are down in June in comparison with May but with end of season sales getting delayed and many retailers having gone on sale in July, we expect July numbers to be better," said Ravinder Choudhary, assistant vice-president at Vegas Mall in Delhi's Dwarka. Contrary to the weak demand sentiments across daily essentials and consumer goods, lifestyle retailers have recorded healthy footfalls and same store sales growth (SSSG) in the top tier cities and malls over the last few months with a healthy pickup in store additions. Most categories witnessed a double-digit increase with sports goods and jewellery seeing a 27-29% jump in sales followed by quick service restaurants and consumer durables posting 16% sales increase.

The sales expansion comes on the back of price increases in the past few quarters although recent moderation in raw material prices should cushion gross margins for retailers.

Analysts expect listed retailers to post strong double-digit sales growth for the quarter ended June, the first disruption-free first quarter for the sector since the outbreak of Covid-19 in early 2020. Sales momentum will continue in the current fiscal, they said. "Overall, the revenue traction appears strong for FY23 with healthy SSSG, and this seems validated by the first quarter expectation of higher price point consumption," Motilal Oswal said in a recent investor note.