The country’s second-largest retailer Avenue Supermarts, which runs the DMart chain of stores, would like to be seen as a grocer, CEO & MD Neville Noronha said in a conversation with FE.
“Retail is about evolution, where products and categories constantly change. The broad perspective for us is that we want to be seen as a grocer. Grocery has been our first priority,” he said of the company’s way forward in a competitive market.
On Saturday, the retailer reported a 17.31% year-on-year growth in its consolidated topline to Rs 13,572.47 crore for the October-December period, led largely by food and grocery sales.
Consolidated net profit for the quarter under review grew 17.09% year-on-year to Rs 690.41 crore, while operating margins dipped marginally to 8.25% in Q3 versus 8.34% reported last year.
By the retailer’s own admission, festive season sales in non-fast-moving consumer goods (non-FMCG), that is, discretionary categories were slow, though the post-Diwali sales trend has been favourable in general merchandise and apparels (GM&A).
“Contribution from general merchandise and apparel has stabilised and trends are encouraging post Diwali,” Noronha said, admitting that the emergence of specialists in apparel retail had affected DMart’s performance in the category.
Analysts have pointed to growth of the value apparel retail format in India, led by players such as Trent’s Zudio, Shoppers Stop’s Intune, Max Fashion and Reliance Retail’s Yousta, which has cut into the sales of retailers such as DMart, which also stocks value apparel products within its stores.
“The secular trend has been the emergence of a lot of specialists who have come into the market notably on the apparels side. This has impacted us a little bit. While there is a bit of slack from our side, we are working on it,” Noronha said.
The retailer derives around 56% of its revenue from foods; 21% from non-food FMCG and 23% from general merchandise and apparels (GM&A), according to sector experts tracking the company. Prior to Covid-19, almost 27-29% of Dmart’s revenue came from GM&A.
Analysts say that a revival in general merchandise and apparels augurs well for DMart, which derives higher margins from the segment versus food and FMCG.
“Though food and FMCG is a high sales-volume driver, for a better margin profile, it is sales from general merchandise and apparels that can aid performance,” G Chokkalingam, founder and MD at Mumbai-based Equinomics Research, said.
Store openings for Dmart were five in the December quarter versus nine reported in the September quarter and three seen in the June quarter.
Noronha said that the March quarter was traditionally a period of higher store openings for the company.
“Traditionally, our store openings have been loaded towards the March quarter. This is primarily because of the weather pattern of the country, where much of the pending work on stores tends to get completed post the monsoons,” he says.
A look at the store openings in the March quarter over the years for the company indicates that the retailer has opened upwards of 15-20 outlets on an average in the last quarter of the financial year. This trend is expected to stay in FY24 as the retailer is likely to do a bunch of new store additions in Q4.