Retail sector earnings could end up being a mixed bag. Some segments in the retail sector are expected to report a steady growth in Q2FY26 quarter amidst growing optimism on demand revival aided by a boost from an early festival season and GST rationalisation, analysts said. Value fashion retailers continued to outperform, while some large retailers are expected to post resilient growth but some deceleration.
Footwear retailers are expected to post modest growth recovery in single digits as they continued to face muted volume during the quarter. In jewellery segments, some leading players have indicated sustained healthy demand supported by early festive buying and steady wedding purchases despite elevated gold prices.
“Q2FY26 brings growing optimism on a demand revival following the recent GST rate cuts towards quarter-end. Electronics recorded the most significant boost due to the GST reduction with retailers in this sector likely to report improved demand and stronger sales. Apparel and footwear demand remains steady with some segments such as value fashion performing well,” a report by Nuvama Institutional Equities noted in its Q2FY26 report on retail sector.
The report pointed out that the footwear sector continued to face weak demand and muted volume growth leading to modest topline performance. “While companies are focusing on premiumisation and operational initiatives to protect margins, profitability remained under pressure during Q2FY26,” the report added. It added that broadly QSR segment too witnessed muted consumption sentiments owing to Navratri, Shradh, heightened competitive intensity and weather-related disturbances but some players could post healthier performance.
A report by Motilal Oswal Research said that a boost from an early festive season and GST rationalisation could mean Q2FY26 will end up being a steady quarter for retailers. It noted that the wholesale channel did see a transitory impact of GST implementation and weather-related disturbances in certain regions. “However, festive demand and GST cuts led to a pickup in demand, and retailers remain optimistic about the demand revival sustaining beyond the festive season,” it added.
It noted that large retailers would continue to deliver resilient double-digit growth but report some deceleration in the second quarter earnings. Value fashion players are expected to continue to outperform with higher revenue growth aided by store footprint expansion and early festive-led consumption boost. “Ethnic and branded apparel retailers are likely to continue their underperformance in 2QFY26, with revenue growth in low- to mid-single digits. Footwear retailers are expected to see modest growth recovery,” the report noted.
Meanwhile, a report by ICICI Securities noted that some leading jewellery players have indicated sustained healthy demand momentum supported by early festive buying, steady wedding purchases and resilient consumer sentiment despite elevated gold prices.
