Britannia says cities contributed 30% to sales but a lot more to the slowdown

FMCG major Britannia Ltd. has reaffirmed the urban slowdown within the sector during its earnings call. The management mentioned that whle urban markets contributed nearly 30% of the overall sales for the quarter but had a greater contribution to the slowdown.

The management during the earnings call mentioned that the metros grew the slowest for the FMCG segment during the September quarter and the contribution of Metros to the slowdown stood at 2.4x.

The slowdown in the urban markets was led by an increase in household expenditure and not enough increase in income.

The management further said that the demand scenario is still not as robust as it has been in the past and as a result, it anticipates some impact on volumes in the short-term.

For the September quarter, Britannia's volume growth stood at 8%, which was in line with the 8% to 9% growth anticipated in a CNBC-TV18 poll.

Britannia said the company would try and balance both price and volume growth and is closely monitoring the commodity situation and assessing its impact. It also remains vigilant of the competitive pricing action, adding that the planned price hike is to maintain the margin and not to increase it.

Morgan Stanley wrote in its note that the company had earlier guided revenue growth to be in line with volume growth in the December quarter and was aspiring for double-digit volume growth in the financial year 2025. However, there is a downside risk to the guidance, according to the brokerage.

Nomura, too, remains 'neutral' on Britannia with a price target of ₹5,800.

Of the 38 analysts who have coverage on Britannia, 19 have a "buy" rating on the stock, 12 have a "hold" rating, and seven have a "sell" recommendation.

Britannia reported revenue growth during the quarter, but Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) during the quarter was a miss.

Shares of Britannia have extended their losses after the earnings call, currently trading 4.1% lower at ₹5,210. With this, the stock has also turned negative for the calendar year 2024.