The revenue growth of consumer discretionary companies in India has hit a 20-year-low and they are expected to report weak earnings for the December quarter as the consumption pattern for products ac
The revenue growth of consumer discretionary companies in India has hit a 20-year-low and they are expected to report weak earnings for the December quarter as the consumption pattern for products across all categories remains sluggish, says a report.
Discretionary companies include automobiles, luxury goods and high-end retail, among other categories. “Earnings expectations have been tempered across the sector — more so for discretionary companies and to a lesser extent for the large staples companies. Expectations over the next few years are now considerably lower than historical growth rates,” the American brokerage Jefferies said in an earnings preview report, without quantifying it.
“Discretionary consumption is unlikely to worsen from here, and we are yet to see strong signs of recovery,” the report said, adding that FMCG companies are faring slightly better now but they still face further risks from the deepening rural and low-end consumption down cycle.
The report also warned of deflationary trends saying revenue growth for consumer companies has been under pressure for several quarters, now the biggest worry is the deflationary trends setting coupled with weak volume growth.
“In real terms, though, FMCG segments seem to be faring better than discretionary categories, where growth has now dropped even below historical lows. While one might wish to bank on the resilience of FMCG, past data suggest that nearly all consumer companies suffer badly in a prolonged slowdown of the kind we are witnessing now,” it added.
