India’s retail sales remained muted in June as high inflation impacted consumer spending. According to data from the Retailers Association of India, the country’s retail sales grew 7% in June over the same month last year, indicating continued pressure on consumer spending due to high inflation. The impact of inflation was more pronounced in North India, where sales increased by only 5%. In contrast, the southern region saw a growth of 8%, followed by the east with 7% and the west with 6%.

Looking at sales growth by category, furniture and furnishing experienced the slowest growth of 3%. This could be attributed to consumers cutting back on discretionary spending in the face of rising prices. Sales of clothing, consumer durables, and electronics all grew by 7% in June compared to the previous year. Likewise, sales of beauty and personal care products as well as quick service restaurant chains also grew by 8%.

On the other hand, white goods sales, including items such as air conditioners, fans, and refrigerators, were negatively affected by poor demand caused by unseasonal rainfall. However, there were positive growth trends in other categories such as sports goods, with a 13% increase compared to the previous year. Food and grocery, as well as footwear, also experienced significant growth of 15% each in June. Notably, jewellery sales saw a growth of 14%, reflected in the performance of companies like Titan Co. and Kalyan Jewellers India Ltd, which reported robust sales during the Akshaya Tritiya festival in April and wedding-related purchases in June.

Retail sales had consistently shown healthy double-digit growth over the past year, driven by pent-up demand following the Covid pandemic and a low base effect. In April 2022, retail sales increased by 23% compared to the same month in 2019. May 2022 saw a growth of 24%, while June the previous year witnessed a 13% increase, according to the Retailers Association of India’s data. However, the uneven recovery from the pandemic and persistent inflation has led to varying demand across categories, impacting the profitability of companies in the retail sector.

Notably, several companies, including Dabur India Ltd., Marico Industries Ltd., and Adani Wilmar Ltd., have reported that demand recovery has been uneven across different categories, mainly due to inflation. For instance, packaged food categories like edible oil, which have seen a sharp price cut, have witnessed growth, while other segments are lagging. Additionally, sporadic increases in vegetable prices during the monsoon season have put further pressure on household budgets.

In terms of earnings, Avenue Supermarts Ltd., the operator of the DMart chain, reported weak apparel demand that is hurting profitability. Kumar Rajagopalan, Chief Executive Officer at the Retailers Association of India, stated that while moderate growth is observed as consumers return to their normal routines, a more conclusive assessment will be possible after the festival season.

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