Avenue Supermarts Q2 Results Review - Medium-Term Revenue Growth Rates Getting Reset Lower: ICICI Securities

ICICI Securities Report

Accelerated ramp-up of online grocery formats (quick commerce) in large metro cities led to deceleration of key growth metrics for Avenue Supermarts Ltd.-

1. lowest revenue growth (+14% YoY) in a quarter ever,

2. Like-for-like growth at 5.5% versus high-single digits earlier,

3. Footfalls (bill cuts) declined 1% QoQ vs +4% QoQ in base quarter,

4. Revenue throughput per store was flat YoY.

Retail expansion rate (14% YoY) was stable. Ebitda margin was lower by ~30 bps due to operating deleverage despite better gross margin (mix-led). Overlap of consumers seeking convenience and shopping at D-Mart (value) appears to be higher than expected which should continue to impact its growth trajectory.

Further, scale-up of D-Mart Ready continued to be significantly lower (+21% YoY in H1 FY25) versus quick commerce despite lower absolute size.

In the context of disruption from quick commerce, we downgrade stock to Reduce (from Add) with revised target price of Rs 4,100.

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