Top picks: Axis Securities prefers Trent and Westlife Foodworld in retail space post Q3 results

livemint.com:

Trent and Westlife Foodworld are the top picks of Axis Securities in the retail space post the December quarter (Q3FY24) results. Retail companies have reported mixed performance, with premium retailers sustaining their growth momentum. However, value retailers continued to face pressure, noted the brokerage.

It further added that companies have highlighted that rural growth is likely to pick up gradually, led by increased government spending, easing inflation, and higher urban remittances. Moreover, EBITDA margins have faced pressure due to negative operating leverage stemming from subdued topline performance, noted the brokerage. "Discretionary demand, particularly in the value segment, continues to be subdued, especially in smaller towns (Tier 2/3/4), which are facing significant pressure.

While the premium segment continues to exhibit strength, the value segment, particularly in apparel, remains under pressure. However, Relaxo, within our coverage, has displayed sustained signs of recovery in rural areas. Looking ahead, there is an expectation for volume growth to accelerate in rural regions.

Despite the subdued environment, most companies within our coverage universe have either maintained or increased their store opening guidance, particularly as they expand into smaller towns. This strategic move underscores the resilience of their long-term growth prospects," rationaled Axis. Rapid formalisation undergoing – As per Axis, the Indian retail market, predominantly unorganized, presents significant opportunities in smaller cities and towns.