retail stocks are booming. why?

retail stocks are booming. why?

last week was a phenomenal one for billionaires. Jeff Bezos made a short trip to space, came back and thanked his employees and customers for funding his expedition. similarly, two of India’s richest men also have retail consumers to thank for adding to their fortunes of late. Mukesh Ambani, whose businesses include Reliance Retail, and Radhakishan Damani, whose flagship Avenue Supermarts Limited operates the D’Mart chain, to be precise.

roaring retail results

both Reliance Retail and Avenue Supermarts more than doubled their profit in the first quarter of FY22 over the corresponding period last year, with a 123% and 132% growth, respectively. digital commerce (via JioMart, Ajio, and Reliance Digital website) was a huge peg for the former. it grew from a 5% share of the quarterly sales in Q1 FY21 to nearly 25% this year. this was perhaps due to the second wave of Covid-19 which led to a lot more people ordering groceries online, something that has become a regular habit for many. this helped mitigate the impact of the second wave of Covid-19, which saw only about 35% of its physical stores being operational. an integration with WhatsApp for its JioMart services and its acquisition of Just Dial should also help it go from strength to strength.

similarly, D’Mart’s online offering ‘Ready’ recorded a 203% yearly growth for the quarter. this, along with adaptations in the supply chain, encouraging foot traffic in stores, and new store openings has market analysts optimistic on the firm.

growth, small and big

another significant contributor to Reliance Retail’s performance was healthy sales across small-town stores. its local kirana store partnerships and last-mile delivery logistics helped it form a habit among a new customer base. this is the case for Amazon as well.

meanwhile, a report indicates that premium consumer durables have seen a massive spike in their uptake. high-end products such as 4K TVs, connected ACs, refrigerators have been in high demand since many started working from home.

while these are encouraging signs, it’s interesting to note that overall retail sales for the quarter were just about half that in the corresponding pre-pandemic period in 2019. Covid-19 is to blame. but there’s no denying that Indian consumers are hungry for more, and growth is inevitable.