ET BrandEquity, a lifestyle company experiencing weak demand across product categories

Motilal Oswal Financial Services Ltd. said many lifestyle companies are experiencing weak demand across product categories.

Stores cleared piles of old stock and companies introduced fresh summer collections.

Although January was weak, February improved slightly due to the wedding season and the extended winter season. Additionally, management expects March to be even better due to Holi and Eid festivals coupled with election spending.

According to the brokerage, the end-of-season sale (EOSS) continued for the same period as last year. Although the number of wedding dates increased in the same quarter, the number of weddings decreased, and the demand environment for ethnic companies is sluggish. Metros/Tier 1 cities/towns continue to outperform Tier 2/3 locations.

Despite the depressed environment, companies continue to add stores at a rate of 10-15%. Traditionally, the final quarter tends to be a good time for retailers to expand stores. Motilal Oswal Financial Services said, “We expect store additions to continue across all companies we cover. However, Vmart is expected to close some loss-making stores. As a result, the company may experience a net closure in the fourth quarter of fiscal 2024.”

Raw material costs have generally remained stable, and some companies have already passed these costs on to customers by reducing prices in the past quarter. We don't expect any significant price cuts by companies this quarter.

Piles of old stock were mostly cleared and companies rolled out fresh summer collections. The combined benefits of lower prices and RM relaxation may support demand recovery in the next two to three quarters, the brokerage added.