Avenue Supermarts, the operator of the DMart chain of stores in India, on Saturday reported a consolidated net profit of Rs 861 crore for the June quarter (Q1) of FY27, a growth of 11.3% year-on-year. While Q1 bottomline is ahead of street estimates of Rs 798 crore for the period, it comes against a backdrop of slowing same-store sales growth (SSG) for the retailer as competition intensifies. By SSG, the reference is to sales growth at stores at least one year and above.
Anshul Asawa, MD & CEO, Avenue Supermarts, admitted that two years and older DMart stores had grown by 5.5% in Q1 as compared to 7.1% in the corresponding period last year. Sequentially, the deceleration in SSG is sharply visible, with the number coming down by half in Q1 from 10.8% reported in Q4. Analysts had estimated DMart’s SSG to moderate to about 7–8% in Q1 from Q4 levels, implying the reported number has been far lower than street expectations for the period.
Consolidated revenue grew 14.9% year-on-year to Rs 18,795 crore in the June quarter, higher than Bloomberg consensus estimates’ Rs 17,189 crore for the period.
Earnings before interest, tax, depreciation and amortisation (Ebitda) in Q1 stood at Rs 1,499 crore, as compared to Rs 1,299 crore in the corresponding quarter of last year. This is ahead of the Bloomberg consensus estimates of Rs 1,567 crore for the period. Ebitda margins stood at 8% in Q1 compared to 7.9% in the same period last year.
The company’s board also approved raising Rs 1,000 crore through the issuance of non-convertible debentures (NCDs) on a private placement basis. The funds will be raised in one or more tranches to boost the company’s financial flexibility for operations and ongoing expansion. This follows the retailer’s aggressive store addition strategy and recent purchase of commercial real estate in Thane, Maharashtra, for nearly Rs 100 crore, experts said.
Quick Commerce Expansion
“In large metros, growth in older stores which have significantly higher revenue per square foot was flat this quarter,” Asawa said. In Q1, revenue per sq. ft. stood at Rs 8,571 versus Rs 8,395 reported in Q4 and Rs 8,779 seen in the corresponding period last year.
The growing popularity of quick commerce is adding to the pressure. Instant-delivery platforms are increasingly capturing routine and top-up grocery purchases, reducing footfalls at large-format supermarkets such as DMart, which have traditionally relied on bulk shopping trips, according to analysts at Citi.
Discretionary Shift
DMart’s sales continued to be dominated by food and grocery, which contributed 54.9% of topline in Q1, down from 55.6% a year earlier. General merchandise and apparel, the retailer’s higher-margin discretionary segment, accounted for 25.5% of revenue, up from 24.7% in the year-ago quarter, while non-food FMCG products contributed 19.6%, in line with the 19.7% number reported last year.
The company also added only three stores in Q1, among its slowest quarterly additions in recent years, taking its total number of stores to 503.
The retailer said it is beefing up its senior management, announcing that Lalit Ahuja, who previously served as executive vice president for operations, had been promoted to chief operating officer, effective 13 July.
Bhaskaran N, who was appointed whole-time director and chief operating officer in the previous quarter, has now been reappointed to the board in the same role. Parvez Vandrewala, currently executive vice president for operations, will move into the newly established role of ‘head of the centre of excellence’ from November.