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Consumer Discretionary Sector Poised for Strong Q4 Growth on Demand Recovery

Consumer discretionary companies are projected to post robust revenue and earnings growth for the March quarter, driven by a broad-based demand recovery. The jewellery segment is a standout, expected to clock about 47% year-on-year revenue growth fueled by high gold prices. Other segments like apparel and paints are also showing a pickup, with overall margins for the space anticipated to expand. The report suggests that with moderating valuations and emerging fundamental improvements, the sector's risk-reward ratio is becoming reasonable.

Key Points: Consumer Firms See Strong Q4 Growth on Demand Recovery

  • Jewellery segment leads with ~47% growth
  • Apparel sector to see ~16% revenue rise
  • Margins expected to expand by 50bps
  • Operating leverage supports profitability
  • Valuations offer reasonable risk-reward
3 min read

Consumer discretionary firms likely to post strong Q4 growth on demand recovery: Report

HDFC Securities report forecasts ~23% YoY revenue growth for consumer discretionary firms in Q4, led by jewellery and apparel segments.

"consumer discretionary coverage universe... is expected to deliver ~23% Year on Year revenue growth in Q4 - HDFC Securities Report"

New Delhi, April 18

Consumer discretionary companies are expected to post strong revenue and earnings growth in the March quarter of FY26, supported by a recovery in demand across segments, according to a report by HDFC Securities.

The report points to early signs of improvement across categories, noting that the "consumer discretionary coverage universe (ex-Eternal) is expected to deliver ~23% Year on Year (YoR) revenue growth in Q4, underpinned by a broad-based demand recovery."

It adds that this growth is driven by multiple segments moving together rather than a single category leading the trend.

Jewellery continues to stand out within the sector. The report says the segment "continued its strong growth momentum, driven by the steep increase in gold prices and rebound to high single-digit buyer growth following three flat quarters." It also estimates that "jewellery... [will] clock ~47% YoY revenue growth in Q4."

Other segments are also showing a pickup, though at a more moderate pace. The report notes that "apparel sector is likely to report ~16% revenue growth YoY," adding that "value apparel retailers are likely to outperform premium retailers, driven by recovery in SSSG and retail area expansion."

The paints segment is also expected to see improvement. The report states that "growth is expected to accelerate (on a low base), supported by preemptive channel stocking ahead of industry-wide price hikes in April."

New-age businesses continue to add to overall growth. In food delivery, "we expect minimal impact on order volumes despite menu curtailments caused by LPG shortages."

Alongside revenue growth, margins are also expected to improve, though gradually. The report notes that "margins for our discretionary space (ex-Eternal) are expected to expand by 50bps YoY to 10%, with EBITDA growth of ~29% YoY."

It adds that profitability trends vary across segments. In jewellery, "we have penciled in ~20bps margin expansion to 11.1% as strong SSSG is partially offset by unfavorable product mix." In paints, "favorable raw material prices... should drive GM expansion," while "footwear companies... are likely to see margin expansion of ~50bps YoY." Apparel margins are also expected to improve, with "~40bps YoY expansion due to operating leverage."

The report also highlights that operating leverage is playing a role in supporting margins across categories. It says, "food delivery margins are expected to improve due to higher platform fees and operating leverage," though it cautions that "high competitive intensity... might keep margin expansion in check."

At the same time, some near-term challenges remain. The report notes "minimal pressure on cost structures due to LPG shortage in Q4," but adds that this "will be a key monitorable in Q1FY27 and beyond."

Overall, the report suggests that the sector is beginning to stabilise after a period of uneven demand. It states that "with valuations moderating significantly... and fundamental green shoots emerging across segments, most pockets of our coverage now offer a reasonable risk-reward ratio."

- ANI

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Reader Comments

R
Rohit P
Good to see value apparel outperforming premium. This shows the real demand is coming from the middle class, not just the wealthy. When the common man feels confident to spend, that's when you know the economy is truly recovering. Bharat is driving this growth.
A
Aman W
The report is optimistic, but I have a respectful criticism. It glosses over the LPG shortage impact. Saying food delivery had "minimal impact" feels disconnected from ground reality. Many small restaurants in my area had to reduce menus or increase prices. This affects the entire chain, not just discretionary spending.
S
Sarah B
Interesting read. The broad-based recovery across segments is the key takeaway. It's not just one hot sector, but multiple pillars like jewellery, apparel, and paints all moving together. That suggests a healthier, more sustainable uptick in consumer sentiment.
K
Karthik V
The margin expansion is crucial. For years, companies were selling more but earning less. If operating leverage is kicking in now, it means they've become more efficient. This should lead to better stock performance and more investment in the sector. Time to review my portfolio!
N
Nisha Z
Jewellery growth at 47% YoY is mind-blowing! It shows our cultural affinity for gold is unshakeable, even with high prices. This is a very Indian driver of growth that global reports often miss. When a family has a little extra money, the first thought is often gold, not a fancy vacation.

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