Gold jewellery retailers face negative credit outlook, fewer store openings: CRISIL
Gold jewellery retailers are facing less investment and fewer store openings due to dampened customer demand in the current financial year, and recovery is expected to be gradual.
Gold jewellery brands across India have faced lower cash accrual this financial year due to the ongoing coronavirus pandemic, credit ratings firm CRISIL announced in a report on Thursday, accessed by ET Bureau.
Retailers face increased inventory due to lack of demand and demand is expected to gradually pick up during the upcoming festive season. With many weddings still postponed due to ongoing restrictions, pent up demand for wedding jewellery is expected to manifest later.
“The number of new store additions is expected to reduce to almost a third of the average between fiscal 2017 and 2020,” said CRISIL.
The firm also predicted that capital investment in the gold jewellery retail industry will be 70% lower this financial year compared to average rates over the past four financial years.
“The dent in cash accrual will be material given the fall in absolute profit because of the sharp decline in revenue,” said CRISIL’s director Mohit Makhija, ET Bureau reported.
“That, along with increased inventory holding owing to a sharp decline in sale volume- and despite lower store expansion- will affect the credit metrics of jewellers.”
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