DMart Q1 Results: Profit Misses Estimates, Margin Contracts On Higher Expenses
Net profit of Radhakishan Damani-led company rose 2% over a year earlier to Rs 658.8 crore in Q1.
Avenue Supermarts Ltd.'s first-quarter profit rose marginally but missed estimates, even as the DMart chain operator's margin contracted on account of higher costs and weak demand in the discretionary category.
Consolidated net profit of billionaire Radhakishan Damani-led company increased 2% over the previous year to Rs 658.8 crore in the three months to June, according to its stock exchange filing. That compares with a consensus estimate of Rs 808.3 crore, according to analysts tracked by Bloomberg.
Avenue Supermarts Q1 FY24 (Consolidated, YoY)
Revenue rose 18% to Rs 11,865 crore compared with an estimate of Rs 11,923 crore.
Operating profit up 3% at Rs 1,035 versus the estimated Rs 1,172 crore.
Margin narrowed to 8.7% against 10% on higher expenses. Analysts had pegged the metric at 9.8%.
Total expenses rose 20% to Rs 11,007 crore.
"Overall gross margins are lower compared to same period in the previous year, primarily due to lower sales contribution of apparel and general merchandise," said Neville Noronha, chief executive officer and managing director, Avenue Supermarts Ltd. "However, the general merchandise contribution is recovering and trending towards pre-pandemic levels."
The slowdown in apparels is mostly structural and beyond the temporary turbulence, according to analysts at ICICI Securities. The brokerage has raised concerns over DMart's revenue growth slowing to 18-20% from the pre-Covid levels of 25-30% and continued underperformance in revenue per square feet, currently 9% below pre-covid, due to slower-than-expected recovery in the margin-accretive segments like general merchandise and apparel.
"Over the last five years, [FY19-23] the general merchandise and apparel segment revenue for DMart has underperformed its foods and non-foods by 26% and 20%, respectively," the brokerage said in a note.
The company added just three stores during the quarter under review, taking the total to 327 as on June 30.
Shares of Avenue Supermarts closed 0.61% higher on Friday as against benchmark Nifty 50's 0.78% gain. The results were declared on a market holiday.
