HSBC Expects Weak Q1 Margins For FMCG Despite Price Hikes

Consumer staples companies are likely to report subdued growth in the first quarter of FY26, according to HSBC’s latest earnings preview. The report highlights that continued weak demand and intense competition are expected to keep revenue and profit growth under pressure across the sector. HSBC stated, “Consumer staples companies have been bearing the brunt of weak underlying demand amid high competitive intensity.” The firm forecasts 5% year-on-year revenue growth and a mere 2% increase in EBITDA for the quarter, reflecting persistent macroeconomic and sector-specific challenges.

Demand Recovery and Input Costs Remain Key Headwinds

HSBC’s report attributes the muted performance to ongoing challenges, including slow demand recovery and elevated raw material costs. While there are signs of gradual demand improvement and a favourable low base, these factors are not expected to result in significant top-line acceleration. The sector continues to grapple with limited pricing power and pressure on margins, driven by cost inflation and competitive pricing strategies. This subdued environment is likely to affect overall profitability, keeping earnings growth minimal for most players in the space.

Marico, Britannia Among Projected Top Performers

Despite the sector-wide headwinds, HSBC identified Marico and Britannia as potential outliers. Marico is projected to report 18% year-on-year growth, primarily led by price hikes and robust performance in its food business. Britannia is also expected to post a 10% growth, supported by a combination of volume expansion and price increases. However, even for these companies, margin expansion remains a challenge due to ongoing cost pressures. The report maintains that overall sector profitability will remain constrained, with EBITDA growth capped at just 2% for the quarter.

Jewellery, Discretionary Sectors Show Resilience

On a more positive note, the consumer discretionary segment is expected to perform slightly better. HSBC notes a relatively stronger demand environment in this space, particularly within the jewellery industry. Factors such as high gold prices, increasing market share, and continuous retail network expansion have supported healthy growth. Despite these brighter spots, HSBC has not made any revisions to its earnings estimates or target prices, emphasizing the need for companies to deliver stronger growth to justify current valuations.
(From ANI)

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