Jewellery sales to be up by almost 12% in FY24, says ICRA

Jewellery consumption growth for FY24 is estimated to be 10-12 per cent from the current 8-10 per cent estimated earlier, primarily driven by the rise in gold prices, credit rating agency ICRA said in a note on Friday.  ICRA also estimated the revenue growth of organised jewellers at 15-18 per cent YoY.

“Jewellery consumption is estimated to have risen by more than 15 per cent YoY in the first half of FY24, aided by stable demand during Akshaya Tritiya and higher gold prices,” ICRA said in the note today. However, ICRA projects the growth rate to moderate to 6-8 per cent in second half of current fiscal due to sustained tepid rural demand amid persistent inflation.

According to ICRA, the elevated price levels supported revenue expansion for most jewellery retailers in the face of muted volume growth. The recent tensions in the Middle East and the evolving global macro-economic environment could keep gold prices elevated in the near term. After remaining volatile between December 2022 and April 2023, gold prices were relatively stable in the first half of FY2024, although up 14 per cent compared with the average prices in the first half of  FY2023.

“ICRA’s sample set of 14 large jewellers, which account for 70 per cent of the organised market, is projected to record a healthy revenue expansion of 15-18 per cent YoY in FY2024 on the back of their planned retail expansions and a gradual shift in consumer preferences towards branded jewellers. The organised jewellery retailers are expected to outperform the industry over the medium term supported by tailwinds from accelerated formalisation of the industry,” Sujoy Saha, vice president and sector head, ICRA said.

ICRA projects some moderation in FY2024 in the operating margins of organised players owing to the front-loaded operating costs for planned store additions and increased advertising expenditure in the face of rising competition. Nevertheless, the benefits of economies of scale are likely to support the operating margins, which are estimated to hover in the range of 7.5-8 per cent over the near to medium term.

“The organised jewellers had recommenced their retail expansion in FY2023, after a brief hiatus in FY2021 and FY2022, with the store count of ICRA’s sample set estimated to have risen by more than 20 per cent during the year. The momentum is likely to continue over the near to medium term with an estimated increase in store count by 18-20 per cent YoY in FY2024, supporting their revenue growth,” Saha added.