Why this Sharekhan analyst is bullish on jewellery and footwear stocks
Titan Q3 should be better. Q2 can be considered as an aberration in terms of performance.
Anything to be worried about when it comes to Q2 performance of Titan?We have seen a lot of consumer players, FMCGs, retail facing companies suffer given the slowdown scenario. Should we be worried about it given that the gold prices still continue to be high?
The second quarter performance was expected to be lacklustre mainly because gold prices have spiked significantly. There was also a slowdown in the discretionary environment. While in July, sales were down, in August and September, retail sales grew 15%. That was secondary sales retailers to consumers. That gives us a visibility of hope that during the festive season, growth would be much better and will result in better performance in the third quarter (Q3). That is what I expect in the jewellery space. In watches also, I believe Q3 should be better. Q2 can be considered as an aberration in terms of performance. We have already seen gold prices correcting 5-6% from highs. That will help in building up consumer sentiment.
If gold prices stabilise from the current level, we will start seeing gradual buying in the jewellery space. That is something you need to wait and watch and that gives us a sense of better Q3.
Titan has not glittered this festive season and it is being punished for that by the stock markets as well. The stock has recovered in trade a bit. Some other counters are doing decently this festive season. Whirlpool is up 3%. Do you think people are not buying jewellery but are buying more of the essential needs?
I believe jewellery spends were put on hold mainly because the prices have gone up substantially and now we have seen some kind of correction in past few days and people are hoping that there will be further correction in the gold prices. If that happens or gold prices stabilise at current levels, there could be some gradual increase in sales. But we need to wait because the festive season has just begun and the wedding season is also around the corner. We should start seeing gradual growth in the jewellery spends.
Given the uptick in the consumer mood and festive season, wedding season etc, which are the segments that will outperform? Which will be your top bets which could benefit given the consumer uptick?
Titan, obviously. One odd quarter’s performance can be an aberration but the company as a whole has performed well in the past few quarters and the second half might be better for Titan. Jewellery is where a shift is happening from non branded to branded and that is helping Titan.
Secondly, we believe a large part of the cut in corporate tax will be passed on to the consumers in the form of promotions or discounts. That will also help the jewellery and some of the discretionary space to perform better.
I firmly believe in the jewellery and the footwear space where companies like Bata and Relaxo have shown sustained performance for the last few quarters and where the margins have been good. Companies like Bata, Titan or Relaxo Footwear will continue to do well in the coming quarters.