DMart Q4 Results: Profit Up 8%, Higher Costs Dent Margin

Avenue Supermarts Ltd., the operator of retail chain DMart, reported an increase in profit for the January-March quarter even as margin slipped on account of higher costs and weak demand in the discretionary category.

Consolidated net profit of the Radhakishan Damani-led company increased 8% year-on-year to Rs 460.13 crore in the three months to March, according to its stock exchange filing. That compares with a consensus estimate of Rs 438.8 crore, according to analysts tracked by Bloomberg.

Avenue Supermarts Q4 FY23 (Consolidated, YoY)

• Revenue rose 21% to Rs 10,594 crore, largely in line with analysts' estimates of Rs 10,469.4 crore, driven by store expansion.

• Operating profit rose 4% to Rs 771.5 crore against an estimated Rs 703.7 crore.

• Margin narrowed to 7.3% against 8.4% due to higher expenses.

• Total expenses rose 22% to Rs 10,002 crore.

Revenue growth of FMCG and staples segment continues to outperform general merchandise and apparel, according to Neville Noronha, chief executive officer and managing director, Avenue Supermarts Ltd.

The sales contribution of general merchandise and apparel segment at 23% is still well below FY19 levels of 28.3%. On the other hand, the food business comprises 56% of sales, while non-food is at 21% of total sales.

"Lower consumer spending in general merchandise and apparel has impacted the margin mix downwards," he said. Initially, impact of Covid and now higher inflation have delayed complete recovery in this category.

For the full fiscal, the company reported a 38.3% jump in revenue to Rs 42, 840 crore. Its net profit rose 59.4% to Rs. 2,378 crore in FY23.

Two years and older DMart stores grew by 24.2% in FY23 over the previous year, said Noronha. There are 234 stores that are two years or older.

The hypermarket chain added 18 stores during the quarter, taking the total count to 324 as on March 31, 2023.

Sales per square feet for DMart had declined from peak of Rs 35,647 to Rs 27,454 over FY19-22. The decline in this unit metric during the pandemic years has been on account of lower footfalls, pressure on margin accretive apparel and general merchandise category and opening of larger size of new stores. In FY23, however, it improved meaningfully to Rs 31,096.

Another positive was the sharp growth in the total number of bill cuts by 43% to 25.8 crore in FY23. However, the average bill size declined moderately by 3% to Rs 1,621, the investor presentation showed.

On e-commerce front, DMart Ready has further expanded its e-commerce operations in 10 new cities while continuing to deepen its presence in the existing 22 cities. Its operations now span across 32 cities in India.

During the quarter, DMart also commenced operations of its pharmacy shop-in-shop through one of its subsidiaries — Reflect Healthcare and Retail Private Limited — through the launch of its first outlet in Mumbai.

Shares of Avenue Supermarts closed 0.71% lower on Friday as against a flat benchmark BSE Nifty 50. The results were declared on a market holiday.