Last updated: 12 Jul, 2021 | 02:50 pm
- Net profit below estimates: DMart’s net profit dropped 74% on-quarter to Rs 115.13 crore in the Apr-Jun 21 period, missing street estimates. Analysts had earlier anticipated a net profit of about Rs 160 crore. However, as compared to the previous year, DMart’s net profit is up 132%, mainly due to a lower base (due to lockdown in Apr-Jun 20).
- Revenue in-line: DMart’s revenue declined by 31% on-quarter to Rs 5031.75 crore, in-line with street expectations. The revenues are higher by 31% on-year. The company said that the lockdowns imposed in various parts of the country weighed on its topline.
- Operating profit and margins (Sequentially) - The operating profit was at Rs 221.21 crore, down by 64% sequentially. Operating margins declined 400 bps to 4.4% as compared to 8.4% in the previous quarter.The company’s margins were negatively impacted due to restrictions on sale of non-essential products in the quarter.
- Customer footfalls rise: Despite lesser hours of operations this time in the quarter, DMart said that it saw higher customer footfalls than Apr-Jun 20. One of the key reasons for this is that even though restrictions on operations were more severe, personal mobility was relatively less stringent than last time, said DMart. Higher footfalls indicate that customers continued to prefer Avenue Supermarts due to its lower price offering.
- Stores Added: During the quarter, the company has added 4 new stores, which takes the total count of stores to 238. The company has stores in states like Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Rajasthan, NCR, Telangana, Tamil Nadu, Madhya Pradesh, Chhattisgarh, and Punjab.
- Update on Supply chain: Despite the lockdown, the company said, “There has been no significant impact on the supply chain during the period April - June. The inventory is going back to normal levels. To get back to pre-Covid sales momentum,a store would need at least 45 days of unhindered operations.”
DMart results review
- Avenue Supermarts Q1 results have been lacklustre in Apr-Jun 21 period, as impact of second wave of Covid 19 weighed on the topline and bottomline. Many retailers including DMart had to shut down stores in some places for nearly a month. This took a hit on its bottom line .While on YoY basis the company has done pretty well, the company’s performance is not upto mark when compared to the previous quarter.
Outlook going forward
Avenue Supermarts had indicated that it will add 59 stores over FY20-22. It has added 20 stores in FY21. It may look to add 39 stores in FY22, implying 35 store additions over the next nine months, provided there are no further restrictions. However, the target looks steep given the uncertainty around Covid-19 and its variants. There has also been a steep decline in margins, due to limited sale of general merchandise. The margins could remain under pressure over the medium-term, as customers continue to prefer online retailers amid the pandemic. Further, the company faces steep competition from larger peer Reliance Retail. Most brokerages including Jefferies, ICICI Securities and Kotak Institutional Equities have retained a bearish outlook on DMart shares. Jefferies has an ‘underperform’ rating with a target of Rs 2,300 on DMart share price.