The Budget doesn’t really do much for the retail sector, at least directly. Tax tweaks can put more money in consumers’ hands — boding well for spending — or reduce disposable incomes. Indirect tax changes can also affect retail companies’ cost structures.

The previous Budget raised tax slabs slightly, and, with lower inflation, improved customer sentiment. What also helped was the steady pace of store expansion and price-led growth by retail players. Most retail stocks have soared since the previous budget.

Staying local helps

Revenues for the 11 listed retailers (barring Future Retail, which does not have comparable numbers) were up a good 17 per cent for the nine months to December 2014. V-Mart benefited from both its value orientation and a localised, concentrated penetration into select tier-II cities. It added 18 stores in the first nine months of the fiscal. Strong regional standing also benefited apparel retailer Indian Terrain. The two stocks have shot up by 66 per cent and 256 per cent, respectively, since the last Budget. Speciality retailer Page Industries’ pattern of posting healthy growth in numbers retained investor attention, with the stock up 52 per cent. But retail stalwarts Shoppers Stop and Trent haven’t done as well on the bourses. While Shoppers Stop managed healthy sales growth, it was hurt by the competition posed by e-commerce players. The company’s hypermarket arm broke even only in the December quarter, resulting in a low net profit growth. Trent was similarly pulled down by its hypermarket arm and the faltering games-and-music business in Landmark.

On the cost front, as a proportion to revenues, material costs are up a percentage point to 57 per cent. Prices of raw materials, though, can drop on excess cotton output and lower crude oil prices.

Moves to regulate e-commerce players and tax tweaks can impact consumer spending and the sector’s fortunes.

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