Double-digit sales growth in apparel, ACs, premium goods faces inflation & monsoon test

Kolkata|Mumbai: Sales of apparel, air-conditioners, refrigerators and premium beauty products grew in the double digits in the first two-and-a-half months of this fiscal year, indicating a recovery in discretionary spending.

Companies, however, warned that an uneven monsoon and accelerating inflation could weigh on demand in the coming months.

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Apparel retailers reported sales growth of 12-14% from a year earlier, while white goods makers said demand for cooling products rose 17-18% as a scorching summer boosted demand. Last year, sales volume of ACs had shrunk and refrigerators expanded in the single digits. GST rate cuts and stable apparel prices have helped.

Healthier than Previous Quarter
Strong demand for summer products has also supported a recovery amid geopolitical tensions fanned by the Iran war and inflation concerns.

"Sales in the ongoing quarter have been extremely strong, registering double-digit growth over last year," said Devarajan Iyer, chief executive of department store chain Lifestyle International. "The recovery in consumption that we witnessed in January-March has strengthened further."

While demand has been healthy in recent months, industry executives cautioned about risks from weak rainfall, which could push up food prices, cause rural distress and hurt consumer sentiment.

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The India Meteorological Department has forecast below-normal rains this monsoon. Data for June showed a deficit of 46%.

Inflation, meanwhile, has shown an accelerating trend. It picked up to 3.93% in May from 3.48% in April, driven largely by higher fuel and food prices. Easing of the West Asia conflict could temper concerns over fuel prices, but the threat of El Nino - the weather phenomenon that often affects monsoon rainfall in India - is looming.

Lalit Agarwal, managing director of V-Mart Retail, said sales growth remained healthy at a double-digit pace in the current quarter, though consumption could now face issues depending on rainfall patterns and the trajectory of inflation.

A Bank of America report last week warned that the "passthrough of elevated wholesale prices, along with emerging El Nino risks, continues to pose some upside risks to the retail inflation outlook in India."

Revving Revival
For now, demand remains healthy, say companies and analysts. BofA said there is no "visible slowdown" in the value commerce market, or ecommerce parcel shipments for third-party logistics companies. The brokerage said it has become "more optimistic" on online travel and quick commerce.

LG Electronics said all categories such as ACs, refrigerators, television sets and washing machines have seen positive momentum, supported by improving sentiment.