DMart Q3 Results Review - Margin Pressure Continues; Foray Into Pharmacy A Positive Surprise: ICICI Securities

ICICI Securities Report

Avenue Supermarts Ltd.’s Q3 revenue performance was decent driven by retail expansion and outperformance in foods segment. However, underperformance in general merchandise and apparels and non-food segment contributed towards lower than expected operating profit (weak mix).

Sales per square feet continues to remain ~9% below pre-Covid. However, we believe other than weak sales mix, large size stores also had an impact on lower sales per sqft calculation.

Now, 50% retail area of DMart represents average store size of plus 50,000 sqf. (versus 30-35,000 sqft. earlier).

In e-commerce business, entry into four new cities reflects intended aggression/usefulness of the business-model. Foray into new segment of pharmacy through shop-in-shop model (at one of the store) is reflection of business-optionality in platform companies like DMart.

We believe DMart has and volume tailwinds:

1. inflation (higher absolute gross profit per unit, operating leverage) and

2. likely higher footfalls as more number of consumers prioritise (read lower prices in the trading area).

As per revised outlook we have cut our earnings per share estimates by ~5% during FY23-24E.

Click on the attachment to read the full report:

More Research Reports On DMart Q3 FY23 Results Review

• Underlying Profitability Disappoints: HDFC Securities

• Soft Earnings On Weak Discretionary Demand: Motilal Oswal

• Weak Across Parameters: Dolat Capital

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.