Trent, Westlife Foodworld, and Relaxo: Axis picks top retail stocks after Q4 results

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Trent, Westlife Foodworld and Relaxo Footwear as its top picks in the retail space.In a review note, the brokerage highlighted mixed performance among retail companies. Premium retailers have maintained their growth momentum, while value retailers are experiencing a gradual recovery and Quick Service Restaurants (QSR) continue to face challenges, it said.

Companies expect rural growth to improve gradually due to increased government spending, easing inflation, and higher urban remittances. The brokerage further added that EBITDA margins have been pressured by negative operating leverage stemming from subdued topline performance.Axis Securities reported that consumer demand remains weak, particularly affecting the discretionary sector with a significant impact on QSR, although the value segment has shown some recovery.

The premium segment continues to perform strongly, whereas the value segment's performance is varied. Despite the subdued environment, most companies in its coverage are maintaining or increasing store opening guidance, focusing on smaller towns, indicating strong long-term growth prospects.The brokerage further outlined several factors that make the retail sector a strong investment opportunity.

The rapid formalisation of the largely unorganised Indian retail market presents significant potential, especially in smaller cities and towns where consumers are increasingly opting for branded products due to rising disposable incomes, it noted.These smaller cities are growing faster than metros across various categories like apparel, QSR, and footwear, driven by higher aspirations and increased disposable incomes, further said the brokerage. It expects the sector's structural growth to continue, supported by