DMart Q3 Results Review - Margin Pressure Continues; Foray Into Pharmacy A Positive Surprise: ICICI Securities
Foray into new seg of pharmacy through shop-in-shop model is reflection of business-optionality in platform companies like DMart.
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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 value and volume tailwinds:
inflation (higher absolute gross profit per unit, operating leverage) and
likely higher footfalls as more number of consumers prioritise value (read lower prices in the trading area).
As per revised outlook we have cut our earnings per share estimates by ~5% during FY23-24E.
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