DMart Q3 Results Review - Underlying Profitability Disappoints: HDFC Securities

HDFC Securities Institutional Equities

Avenue Supermarts Ltd.'s revenue grew 24.7% (three-year compound annual growth rate: 18.7%), while sales density remained lower than the pre-pandemic level (~Rs 35,900/square feet versus Rs 38,700/sqft in Q3 FY20; inline).

Low discretionary purchases keep underlying profitability/unit economics subdued. Fast moving consumer goods/staples continued to outpace the general merchandise and apparel category.

Consequently, gross margin pressures continued (14.3%; down 60 basis points YoY; versus our estimate: 15%). Ebitdam followed suit (down 96 bps YoY at 8.6%; our estimate: 9.3%).

We suspect heightened competitive intensity within DMart’s top districts may have had a role to play in lower sales density and share loss in non-discretionary categories.

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