A welcome move for the retail sector in last year’s Budget was the removal of excise duty on branded readymade garments, which first came about in the 2011 Budget.

Most listed retail players operate in the apparel segment.

This apart, the bugbear of foreign direct investment in multi-brand retail also held sway over stocks in the sector.

Divergent performance

Stocks of the three large multi-brand retailers — Shoppers Stop, Future Retail and Trent — sat out of the euphoric run of the broader market. Aggregate sales for the three were up 16.7 per cent for 2013-14, while losses mounted.

Future Retail has its own unique set of problems of high debt and several restructuring moves; the stock has dropped 22 per cent from the previous Budget to now.

Shoppers Stop and Trent both bore the brunt of poor performance of their hypermarket chains. While its partnership with global retailer Tesco lifted the Trent stock, that of Shoppers Stop barely budged.

It was the more specialised retail players such as Indian Terrain, Page Industries and Kewal Kiran which partied hard; their stocks doubling or more in the year past.

While Page’s strong brand equity and pricing power came to its aid, a lower base and a revival in sales growth helped Kewal Kiran. Indian Terrain rationalised supply chain and rolled out new, successful marketing strategies.

Collective sales and net profits for these three companies were up 34 and 36 per cent in 2013-14. Other top performers include value retail chain V-Mart, a recent entrant to the stock markets.

Most retail companies also operate on slim profit margins, making cost control vital. V-Mart, for instance, has an operating margin of 9 to 10 per cent. Trent and Shoppers Stop have even lower margins.

With retailers operating across States, concrete steps towards implementing the GST can help lower costs and lift profit margins.

Any moves to increase consumer disposable incomes and a revival in consumer spending can also drive growth.

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