While the government has permitted functioning of some industrial activities from April 20, sectors such retail would continue to remain under pressure. Besides the extended lockdown where malls/stores would remain closed till May 3 and thereby hurt sales, a likely change in consumer behaviour could also hurt retailers’ business.

These concerns are also reflecting in the stock prices of major retailers such as Titan, Trent, Aditya Birla Fashion & Retail (ABFRL), V-Mart, Bata and Page Industries, among others, which have underperformed the Nifty Consumption index in recent times. While stocks of retailers are down up to 36 per cent over the last month, the latter has remained almost flat during the same period. For Future Retail and Future Lifestyle Fashions, their stocks have plunged by 59-69 per cent due to concern over pledged shares of promoters.

Analysts say, a change in consumer behaviour such as avoiding crowded places, cash conservation, limiting discretionary spending, increased preference to online channels, etc. would continue even six months after the lockdown is lifted. This would keep a lid on retailers business. However, the degree of top-line impact would vary depending upon the nature of items the companies deal with. For instance, Edelweiss Securities have lowered their FY21 revenue estimates by 4-7 per cent for food and grocery retailers such as Avenue Supermarts given its presence in essential items, while it is sharper (16-24 per cent) for many others.

Top-line pressure along with higher component of fixed cost would in turn hurt the operating profitability and overall earnings.

According to Emkay Research, “Retailers are the most impacted due to the loss of sales and a high fixed-cost structure.” The domestic brokerage has lowered its FY21 earnings estimate for by 15-40 per cent for the retail companies in its coverage.

While some analysts believe large companies may negotiate lease rentals, the extent of negotiation in the current situation would be interesting to watch. Muted operating performance would hit companies such as ABFRL and Future Retail the most given their high leverage. Analysts at Edelweiss Securities recommend to avoid these stocks.

Thus, companies’ strategy in terms of distribution (online is just up 10-11 per cent) and pricing, to recover the sales post lockdown would be crucial. Any measures by the government to enhance income levels of individuals, through tax cuts, etc, could provide fresh trigger for this sector.