Indian retailers are keeping price hikes in check amid volatility in fabric, yarn and cotton prices and supply-chain risks linked to geopolitical disruptions, including the West Asia crisis, according to a research report by Nuvama.
Retailers are adjusting sourcing strategies and building safety stocks to manage higher costs and supply risks without hurting consumer demand, the brokerage said in its retail sector outlook.
“Price hikes are being kept highly calibrated,” Nuvama said in its outlook for the retail sector, noting that Page Industries implemented a 2.2 per cent weighted average price increase in May, while V-Mart expects to limit average selling price increases to 3-5 per cent and V2 Retail plans a 4-5 per cent increase in the third quarter.
The report said Page Industries and Go Fashion are building buffer safety stocks as companies monitor volatility in fabric, yarn and cotton prices. Geopolitical conflicts, including the West Asia crisis, are also being closely watched for their potential impact on logistics and supply chains.
Some retailers are taking a more cautious approach to pricing. Vishal Mega Mart is choosing to protect its opening and mid-price points to avoid dampening consumer demand, while some premium players have opted to absorb part of the increase in raw material and logistics costs rather than pass the full burden on to customers.
Nuvama said the impact of higher costs was already visible in the first quarter, with margins across retailers affected by raw material inflation, changes in product mix, end-of-season sales and higher marketing investments.
Arvind Fashions, V2 Retail and V-Mart passed 4-5 per cent cost increases on to consumers, while Page Industries and ABFRL partially absorbed the higher costs.
Despite these pressures, first-quarter performance was mixed rather than uniformly weak. Value retailers and electronics were the strongest segments, while grocery continued to lag and premium apparel faced pressure from fewer wedding dates and the 30-day Adhik Maas period.
Value fashion retailers reported double-digit revenue growth during the quarter. V2 Retail recorded 58.4 per cent year-on-year revenue growth, while V-Mart, Vishal Mega Mart and Style Bazaar grew 23 per cent, 18.7 per cent and 28.7 per cent, respectively.
Electronics Mart India reported 39.1 per cent revenue growth and 34.2 per cent same-store sales growth, while Aditya Vision‘s revenue increased 26.8 per cent.
The report also flagged that headline revenue growth continues to be driven more by store additions than sales growth from existing stores, with a wide gap between revenue growth and same-store sales growth across much of its coverage universe.
Nuvama expects the festive calendar to support demand in the third quarter, although companies will have to balance growth with cost pressures. Durga Puja and Navratri have shifted by up to 19 days into Q3, creating a temporary impact on Q2 revenue, which companies expect to recover in the following quarter.
