Avenue Supermarts is planning to add around 50 to 60 stores over the next two years, of which more than 75% of the stores will be located in the existing clusters.
Avenue Supermarts is planning to add around 50 to 60 stores over the next two years, of which more than 75% of the stores will be located in the existing clusters. The company apart from owning the stores will also consider the lease model considering stiff real estate prices, according to analyst reports.
The company opened its first store in Mumbai in 2002. As of June 30, 2018, it had 157 stores with retail area of 5 million sq ft across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab. The store size ranges between between 10,000 sq ft to 50,000 sq ft. In FY18, it did not shut a single store and added 24 stores, Neville Noronha, CEO and MD, Avenue Supermarts, said, “We aspire to do better than the previous years in terms of store addition.”
According to analysts, the pace of expansion of the company has picked up as Dmart added 24 stores in FY18 compared to 21 in FY17 and will pick up further going forward. According to an Edelweiss report, the company is also open to leasing of property and believes that the long-term ownership model is the best. Further real estate prices have structurally gone up; hence incremental capital expenditure per store would be a little higher. Abneesh Roy, senior vice-president (research), Edelweiss Capital, said in a report, “On store expansion, management has guided for opening 50 to 60 stores over the next two to three years with more than 75% in existing clusters. Store additions will pre-dominantly be under the owned-model, however, management mentioned that it would evaluate the lease model considering stiff real estate prices.”
In FY18, the company’s total revenue grew 26.3% to `15,009 crore, Ebitda was up 38.8% y-o-y to `1,337 crore while net profit was up 62.6% at `785 crore. According to a Jefferies report, the company will continue to open stores largely through owned-model. It will explore the lease model only when owning the property is either not possible or viable. Dmart has been the best-in-class in terms of execution and among the very few to crack the grocery retail model successfully, registering close to 24% SSSG on an average since FY12.
Dmart plans to continue to remain a low-cost retailer albeit competition has intensified since the launch of every day low prices by rival Big Bazaar. This would be achieved by passing on cost savings to customers. Food comprises 51.55%, non-food FMCG 20.03% and General merchandise and apparel make for 28.42% of the company’s revenue.