Avenue Supermarts, the company that owns and operates D’mart chain of stores, reported a 65.8% rise in its net profit for the third quarter of FY18 at Rs 252 crore.
Avenue Supermarts, the company that owns and operates D’mart chain of stores, reported a 65.8% rise in its net profit for the third quarter of FY18 at Rs 252 crore. The growth in the profit was driven by lower interest costs, improvement in sales mix and efficiency of centralised procurement. The performance beat estimates of analysts, based on data collated by Bloomberg. Revenues grew 22.6% from a year ago to Rs 4,095 crore, but fell a little short of expectations. Neville Noronha, CEO and managing director, said, “Gross margin increase is due to improvement in sales mix and efficiency of centralised procurement. Growth in this quarter appears to be lower as compared to the previous year quarter because of demonetisation base effect. Growth in the December 2016 quarter was significantly higher than the growth in the full fiscal 2016-17. We had a very high base in revenue in Q3FY17, driven by high demand post demonitisation. Our sales went up as consumers preferred using cards and didn’t have cash to buy from smaller stores. “We have increased our focus on apparels and general merchandise compared to food and groceries, which fetch lower margins. Also our strict focus on controlling costs and lower finance costs in the quarter helped us to report strong profits.”
According to a Bloomberg consensus, the company was expected to report a Rs 249.9-crore profit on revenue of Rs 4,355.3 crore. Earnings before interest, taxes, depreciation and amortisation was expected at Rs 403.8 crore. Avenue Supermarts reported EBITDA of Rs 422 crore during the quarter under review, up 46.5% year-on-year. The EBITDA margin improved from 8.6% in Q3FY17 to 10.3% in Q3FY18. Finance costs declined 64.7% year-on-year to Rs 1,095.91 crore. D-Mart follows a low-cost-low-price strategy, which aims at procuring goods at competitive prices, using operational and distribution efficiency and delivering value for money to customers by selling at competitive prices. Noronha said the company needs to focus on opening new stores at a faster pace. There is an opportunity to do better there. So far in FY2018, the company has opened 10 new stores and will continue to open a similar or more number of stores in 2018-19. “Although we want to open more stores, finding the right location at the right price is difficult. We will primarily focus on our strategy of company-owned stores and may look at some long-term leases as well. Stores will be opened in existing cities where we are already present,” he said. The company at present operates 141 stores.