Organised F&G retail’s FY21 revenue expected to decline by 5-10%: Ind-Ra

The revenue of India’s organised food and grocery (F&G) retail is expected to decline by 5-10 per cent in FY21, India Ratings and Research said on Monday.

Organised F&G retail's FY21 revenue expected to decline by 5-10%: Ind-Ra
Ind-Ra expects the demand recovery to continue in 2HFY21 and FY22, primarily driven by the festive season demand and strong performance by the online channel

The ratings agency attributed the decline on Covid-19-led business disruptions and general economic slowdown.

In a report issued on Monday, Ind-Ra expects the demand recovery to continue in 2HFY21 and FY22, primarily driven by the festive season demand, strong performance by the online channel, and share gain by the organised segment at the expense of the unorganised sector.

The agency, however, maintained a full-year revenue decline to 5-10 per cent for F&G retail.

“Moreover, by taking cost saving initiatives and proactive liquidity enhancing measures during 1HFY21, large retail players have successfully navigated through a demand slump in 1HFY21, avoiding sharp rating transitions. The agency continues to monitor the recovery in sector revenues and will take appropriate rating actions in case the rebound in sales is significantly below its expectations,” it said.

Furthermore, the report said cited that despite visible green shoots of recovery during the quarter, the sector was adversely impacted by intermittent lockdowns across the country, and the pandemic spreading to non-metro cities as well.

“Most retailers have over 70 per cent of stores open July onwards, but the incremental recovery was gradual with the prevalence of social distancing norms, leading to reduced footfalls in stores, and prioritisation of spends towards essentials and low-ticket discretionary items amid a squeeze on income levels. Based on the select sample data, the revenue recovery was pegged at 45% of the pre-Covid levels for apparel retail, while it was over 95 per cent for F&G retail during the quarter,” it said.

Besides, the report also looked at the country’s apparel retail sector.

It said that this sector can witness a 40-45 per cent decline in revenues for FY21 because of Covid-19 led business disruptions and general economic slowdown.