Jewelery and footwear lead growth
Gaurav Jogani of JM Financial Institutional Securities highlighted in an interview to ET Now that the jewelery segment has seen significant growth, mainly due to gold prices rising 65% year-on-year. “Apart from this, the footwear segment was a surprise. Casual premium footwear players grew in the mid-teens, and grocery players also performed well. Apparel had a mixed bag performance due to an early festive season shift and delayed winter,” he noted.
QSR players adjust to consumer trends
The quick-service restaurant (QSR) sector continues to stabilize, but growth is largely driven by pricing strategies. Jogani explained, “Most QSR players have started increasing value through discounts and combo offers. While transactions have stabilized, price discounts lead to a decline in same-store sales.”
Margin and cost rationalization
Margins in the QSR space have been better than expected, aided by cost-cutting measures and rationalization of unnecessary discounts. “Gross margins have improved, and cost management has been better than expected margins. We expect this trend to continue in Q4, though margins may decline sequentially as it is a non-seasonal quarter,” Jogani added.
Balancing Discounting and Brand Equity
On the impact of discounting on long-term brand value, Jogani observed, “The intensity of discounting has reduced. Players are now focusing on value combos to drive footfall. This has helped improve gross margins while sustaining customer interest.”
Live events
Company Highlights and Sector Outlook
Among discretionary stocks, Titan has been a strong performer, showing strong topline growth despite gold price volatility. “Titan is driving EBITDA growth in a measured manner, leading to improved earnings,” Jogani said. Footwear brands have shown signs of revival and the sector could benefit from GST transitions extending to small discretionary items.
Evaluation perspective
According to Jogani, valuations in the QSR and discretionary sectors have improved from historical highs, with downside limited. “If the SSSG growth rate revives, we may see a bottom in valuations and earnings,” he said.
Competition and industry consolidation
Jogani downplayed the risk of a regional cloud kitchen pointing to consolidation in the sector due to macroeconomic pressures and funding constraints.
Key metrics to watch
For the upcoming quarter, same-store sales growth and brand contribution margin will be the primary focus, along with continued cost rationalization and advertising efficiencies.
Top picks in the sector
Highlighting preferred stocks, Jogani identified Titan, Lenskart, Metro Brands and Vishal Mega Mart in the discretionary space. In QSR, Devyani and Sapphire are recommended.
(You can now subscribe to our ETMarkets WhatsApp channel)
