Domestic Jewelry Retail Grows Almost 12 pc YoY in Q2 FY2023
Domestic Jewelry Retail Grows Almost 12 pc YoY in Q2 FY2023

The domestic jewelry industry is estimated to have registered a healthy growth of around 60 percent in Q2 FY2023 compared to pre-Covid levels (Q2 FY2020).

The performance exceeds ICRA’s expectations of an 8 percent YoY contraction and was driven by urban demand recovery, aided by range-bound prices. However, on a year-on-year basis, the demand recorded a contraction of 2 percent in the quarter owing to a high base, the industry had grown by 70 percent YoY in Q2 FY2022 due to pent-up demand post-lifting of the pandemic-induced restrictions last year.

Going forward, while some contraction is expected in the current quarter, the industry growth in FY2023 is likely to be almost 12 percent YoY, driven by robust growth in Q1 FY2023 and steady wedding and festive demand. Compared with pre-Covid levels, demand in FY2023 is estimated to be a healthy 35 percent higher than in FY2020.

“While the jewelry sector has recorded healthy sales in the Dussehra and Diwali seasons, factors like high domestic inflation, cautious consumer sentiments towards discretionary spending and weak rural economic recovery due to erratic monsoons are likely to continue to constrain demand growth in the near term. Nevertheless, the demand outlook for the sector in the medium to long term remains favourable,” said Kaushik Das, Vice President and Co-Group Head, ICRA.

While the YoY contraction is on account of the high base of last year's demand in Q3 FY2023 is likely to be 20 percent higher than the five-year average Q3 demand before the pandemic (FY2016-FY2020).

Industry growth is likely to remain flat in Q4 FY2023 owing to inflationary concerns, front loading of wedding purchases in Q3, and seasonal variation in demand. This follows a 20 percent YoY contraction in Q4 FY2022 due to omicron and 85 percent YoY growth in Q4 FY2021 on the back of pent-up demand post-lifting of the pandemic-induced restrictions.

ICRA expects the organized jewelry retailers to outperform the industry in terms of revenue growth, driven by continued store expansions and tailwinds from market share gains, supported by a favorable regulatory environment. Upon considering a sample of 14 major organized retailers, the estimated revenue growth for these organized players is expected to be healthy at 20 percent YoY in FY2023.

“With the healthy jewelry demand witnessed in the recent past, organised players had re-initiated their expansion plans in FY2022, which is expected to gain momentum in the coming quarters. The total store count for ICRA’s sample set of 14 major organised retailers is likely to increase by more than 10 percent in the next 12-18 months. Consequently, growth of the organised retailers is expected to outperform the industry,” said Vipin Jindal, Assistant Vice President and Sector Head, ICRA.

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