The report states that the growth is led by sustained momentum in jewellery, ongoing customer acquisition in new-age businesses, recovery in paints, and strong value retail performance
The consumer discretionary sector is expected to have delivered around 22 per cent year-on-year (YoY) revenue growth in the first quarter of the current financial year (Q1FY27), despite margin pressures, as per a report. The growth was led by sustained momentum in jewellery, ongoing customer acquisition in new-age businesses, recovery in paints, and strong value retail performance.
A report by HDFC Securities noted that margins for its discretionary space, excluding new-age, are expected to contract by around 10 basis points YoY to around 13 per cent. Despite demand headwinds from Adhik Maas and Prime Minister Narendra Modi’s advisory on gold purchases, the jewellery segment continued its strong growth momentum, driven by elevated gold prices, early double-digit buyer growth and robust festive and Akshaya Tritiya demand.
The paint sector is anticipated to witness double-digit value growth, driven by sector-wide price hikes, channel stocking ahead of those hikes and demand pick-up due to a delayed monsoon. The report added that within new-age businesses, Nykaa is expected to sustain strong growth by prioritising customer acquisition across beauty and fashion.
In food delivery, order growth remained steady across both platforms. Meanwhile, in quick commerce, the Blinkit versus peers divergence is likely to widen further as peers focus on reducing Ebita burn, as per the report. In apparel, value retailers are expected to continue to outperform premium retailers, driven by high-single-digit same-store-sales-growth (SSSG).
Pressure On Margins
The report pointed out that crude-linked raw material inflation is likely to weigh on gross margins for paints, apparel and footwear players in varying degrees, based on extent of pricing interventions and low-cost inventory pile they hold. Wage hikes across select major states is also likely to weigh on sector margins.
“In jewellery, we expect margins to moderate by around 20 bps due to an unfavourable product mix. Jewellery capital employed may remain elevated due to higher salience of the gold exchange program. In new age, elevated delivery costs in the quarter are likely to put pressure on margins in FD, while quick commerce margins continue to improve YoY as focus shifts from aggressive expansion to milking efficiency gains,” the report noted.
