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Retailers report worst festive sales in 10 years - Mint

Mumbai: A year that is expected to see India’s economy expand at the slowest rate in a decade has already seen the worst festive season sales in 10 years, according to executives in jewellery and consumer product companies.

With much of the season over (barring Christmas, New Year and harvest festivals in the South), the executives say this means a recovery in consumption is unlikely for another year.

“The Indian consumer lives for tomorrow and is keeping his purse strings tight in a difficult economic environment,” says Anjan Chatterjee, chief executive officer, Specialty Restaurants Ltd, which runs restaurant chains Mainland China and Oh! Calcutta, adding that the sales this festive season are the lowest in the past 8-10 years.

October, November and December constitute the festive season in India (it spills into January in the southern part of the country), a period when people buy clothes and jewellery, consumer appliances and cars, eat out and party more, even redo their houses.

Rising inflation and the consequent shrinkage in real wages has meant that a greater share of peoples’ wallets goes towards so-called non-discretionary items, or basics they cannot do without. That has left consumers with less to spend on so-called discretionary products—appliances, apparel, jewellery, eating out, and cars and motorcycles.

Sales continue to fall in Asia’s third largest economy that grew at 5% in the year ended March—the slowest in a decade. Growth further slowed to 4.4% in the June quarter. Most economists expect India to grow by below 5% this financial year.

For makers of jewellery, the season, which starts with Onam (the Malayali new year) and ends with Diwali, accounts for between a fourth and a fifth of annual sales. Gold jewellery sales were lower by 30% during Onam, according to Mehul Choksi, chairman, Gitanjali Gems Ltd.

And this year, Dhanteras, an auspicious day in the Hindu festive calendar that marks the beginning of the Diwali festival and when people flock to buy gold, sales were half that seen last year according to Kumar Jain, director, All India Gems and Jewellery Trade Federation, an industry body.

Nor did the festive season bring any cheer to the automotive sector. “This has by far been the dullest festive season for us in a decade,” a Mumbai-based Tata Motors Ltd dealer said, as previously reported by Mint in a 1 November story on car sales.

The result has been slowing sales growth of discretionary products·down to 13% in the three months ended September compared with 30% a year ago, according to a 18 November report by Credit Suisse Securities (India) Pvt. Ltd analysts Arnab Mitra andAkshay Saxena.

The story isn’t very different in the more basic consumer packaged category. Excluding cigarettes, this sector too grew 13% in the September quarter, lower than the 19% seen a year ago, the report said.

“It is an uneven performance across categories. It will be here to last for three-six months before we see consistent offtake,” Saurine Doshi, managing director and country head of consulting firm AT Kearney Ltd, said on the sidelines of an industry event. “The worst is behind us. I feel now the quarterly growth rates should improve,” said Adi Godrej, chairman of the Godrej Group, at the same event. His optimism was based on the good monsoons and recent government reforms such as increase in foreign direct investment in sectors like retail, Godrej said.

Meanwhile, consumer sentiment continues to deteriorate. Over three-quarters of the participants in a September-quarter Nielsensurvey said they felt they were in the midst of a recession—an increase of 25 percentage points from the 50% that felt so in the June quarter.

Analysts say consumption is unlikely to pick up unless there is some change in the economic environment.

“Growth in consumption and investment generally move in the same direction,” said analyst Nitin Mathur of Espirito Santo Investment Bank Research. Mathur explained that investment growth has been slowing for a while and that while consumption growth continued to move north for at least three years after investment growth started slowing, it too has started correcting now. It is unlikely to pick up unless there is a sharp pickup in investment growth, Mathur said.

 
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