India Retail Q2 FY26: Discretionary Demand Stays Strong
Discretionary demand led the market. GST resets, Tier-II shoppers, and festive demand drive the shift from staples to style, from groceries to gold in India’s retail in Q2 FY26
This analysis relies on Q2 FY26 business updates from 10 companies
Fashion — Trent, V2 Retail, Baazar Style Retail, Sai Silks (Kalamandir)
Jewellery — Kalyan Jewellers, PC Jeweller, P N Gadgil Jewellers
Grocery/hypermarket — Avenue Supermarts (DMart)
Beauty — Nykaa (FSN E-Commerce)
FMCG — Hindustan Unilever (HUL)
Insights reflect this sample, not the entire sector.
1. What Q2 FY26 Says About India’s Shopper
Value & ethnic fashion clocked 17–86% YoY growth (Trent 17%; V2 86%; Baazar Style 71%; Sai Silks 28%) on Tier-II/III demand and early festive timing.
Jewellery shone with ~30–65% growth (Kalyan ~30%; PNG ₹618 cr festive sales +65%; PCJ +63%) despite high gold prices.
Beauty & e-commerce (Nykaa) re-accelerated — GMV in the “thirties,” net revenue mid-20s; fashion vertical regains momentum.
Grocery/hypermarket (DMart) delivered +15% YoY on a high base; network at 432 stores.
FMCG (HUL): near flat–low single digit growth due to short-term GST-led channel reset; medium-term tailwind as 40% of portfolio shifted to 5% GST.
Q2 shows decisive—not uniform—spending: discretionary outperformed staples, but GST reform sets up a staples catch-up from November.
2. Value & Ethnic Fashion
Tier-II/III Is the New Growth Core
Trent (Westside, Zudio)
Revenue (incl. GST): ₹5,002 cr (+17% YoY); H1: ₹10,063 cr (+19%).
Network: 261 Westside, 806 Zudio (incl. 3 UAE), 34 other formats; 40 net Zudio adds in Q2.
Theme: premium-value barbell (Westside + Zudio) with rapid rollout and strong brand salience.
V2 Retail
Revenue: ₹705 cr (+86% YoY); H1: ₹1,334.9 cr (+68%).
SSSG: 23.4% reported; ~10.3% normalized (Durga Puja pull-forward).
Network: 259 stores; ~27.9 lakh sq ft; 43 adds in Q2 (70 in H1).
Theme: disciplined inventory, data-led assortment, limited markdowns → operating leverage.
Baazar Style Retail
Revenue: ₹531.9 cr (+71% YoY); H1: ₹909.7 cr (+55%).
SSSG: 22% (19% normalized); PSF: ₹865/month.
Network: 250 stores, 22.96 lakh sq ft; 20 adds (Q2), 42 adds (H1).
Theme: Eastern India scale-up with improving productivity.
Sai Silks (Kalamandir) — Ethnic Apparel
Turnover: ₹444 cr (+28% YoY); H1: ₹823 cr (+34%).
Openings: 5 stores in Q2; 10 more planned before festive peak.
Formats: Kalamandir, VaraMahalakshmi Silks, Mandir, KLM Fashion Mall (ethnic + value fashion).
Value & ethnic fashion was Q2’s velocity leader: range 17–86% YoY. The flywheel: Tier-II/III rollout → SSSG (normalized) → better PSF → operating leverage.
3. Jewellery
Festive & Weddings Overpower Gold Price Headwinds
Kalyan Jewellers
Consolidated growth: ~+30% YoY; India: +31% with ~16% SSSG; International: +17% (ME +10%).
Candere: +127% YoY; network: 436 (India 300, ME 38, USA 2, Candere 96).
Additional: continued deleveraging; collateral releases; fresh showroom launches.
PC Jeweller
Revenue: +63% YoY; debt: –23% QoQ; >50% cut since FY25; track to debt-free FY26.
Expansion: franchise-owned showroom (Pitampura, Delhi) — calibrated growth.
P N Gadgil Jewellers (PNGJL)
Festive sales: ₹618 cr, +65% YoY (Navratri ₹428 cr +66%; Dussehra ₹190 cr +64%).
Volumes: Gold +10%; Diamond +53%; Silver +64% (revenue: Gold +64%; Diamond +47%; Silver +133%).
Jewellery delivered broad-based growth (store adds + digital + volumes) even with gold at highs — underlining wedding/festive inelasticity and brand trust.
4. Beauty & E-Commerce
Nykaa’s Re-Acceleration
GMV: “close to thirties” (~30–35% YoY); net revenue: mid-20s YoY.
Beauty: 10+ consecutive quarters of mid-20s growth.
Fashion: NSV “higher mid-twenties”; net revenue “low twenties” (ad income lag).
House of Brands: Dot & Key, Kay Beauty, Nykaa Cosmetics fuel mix/margin.
Tailwinds: early festive start; GST reforms lift disposable income.
Nykaa’s growth engine is balanced again (Beauty + Fashion) with brand IP driving profitability.
5. Grocery & Hypermarket
DMart’s Consistency Compounds
Revenue: ₹16,218.8 cr, +~15.4% YoY.
Network: 432 stores (one under reconstruction).
Theme: everyday-low-price model; steady footprint expansion; high cash conversion.
DMart remains the sector’s execution benchmark — dependable mid-teens growth on a large base.
6. FMCG & Household Essentials
HUL’s GST Reset (Short-Term Pain, Long-Term Gain)
GST change: From 22 Sept, ~40% of portfolio (soaps, toothpaste, shampoo, hair oil, talc, lifestyle nutrition, foods) cut to 5% GST (from 12–18%).
Near-term impact: channel disruption (distributors/retailers clearing old MRP); Q2 growth near flat–low single digit; effect spills into October.
Outlook: recovery expected from November as prices stabilize and pantry-loading resumes.
The staples pause is transitory; affordability tailwind likely to support volumes through FY26–27.
7. Cross-Sector Themes: What Changed This Quarter
Festive pull-forward: Calendar effect (Durga Puja/ Navratri in Sept) shifted demand from Q3→Q2 for fashion/jewellery.
Tier-II/III dominance: Majority of store adds outside metros; value-fashion & ethnic brands scaling faster in smaller cities.
Deleveraging & discipline: Multiple players (PCJ, Kalyan, V2) tightened balance sheets; markdowns limited.
Assortment intelligence: Data-led curation/replenishment → better sell-through, healthier PSF.
Divergence → convergence: Discretionary outperformed staples; expect re-sync by Nov–Dec as GST effects fade and HUL rebounds.
The market rewarded footprint quality, inventory discipline, and pricing credibility more than raw footfall.
8. Investor Lens — Positioning Into H2 FY26
Momentum bucket: V2 Retail, Baazar Style, Kalyan — fastest top-line trajectories with footprint expansion.
Compounding bucket: Trent, DMart — consistency, scale, cash generation; defendable moats.
Turnaround/Inflection: PC Jeweller (debt), HUL (GST reset → demand tailwind).
Digital hybrids: Nykaa, Candere — brand portfolios with improving unit economics.
The consumption basket is tilting toward discretionary durability (fashion/jewellery) with staples catch-up likely into Q3/Q4.
Q2 FY26 was discretionary-led and Tier-II/III-powered. With GST-driven affordability improving, expect staples to re-accelerate and the overall retail flywheel to spin faster into the festive peak.
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