Avenue Supermarts :- Overview
Avenue Supermarts, the parent company of the DMart retail chain, faced a significant decline in its stock price following the announcement of its second-quarter results for the financial year 2024-25 (Q2 FY25). The company’s shares fell over 7% after posting lower-than-expected revenue and net profit figures.
Q2 Financial Performance
In the July-September quarter of FY25, Avenue Supermarts reported a modest 5.78% increase in consolidated net profit, reaching ₹659.44 crore compared to ₹623.35 crore in the same period last year. Revenue from operations grew by 14.41%, rising to ₹14,444.50 crore from ₹12,624.37 crore in Q2 FY24.
However, these results did not meet market expectations. The company’s stock dropped sharply by 7.2% to ₹4,241 on the National Stock Exchange (NSE) and 7.1% to ₹4,246.9 on the Bombay Stock Exchange (BSE), reflecting investor disappointment. The company’s market capitalisation stands at ₹2.75 trillion as of October 14, 2024.
Rising Expenses and Slower Growth
Despite the rise in revenue, Avenue Supermarts’ total expenses for the quarter grew by 14.9% to ₹13,574.83 crore, outpacing its revenue growth. The company’s total income rose by 14.34% to ₹14,478.02 crore year-on-year, but analysts pointed out that the growth in key financial metrics was below expectations.
Avenue Supermarts opened six new stores in Q2, bringing the total number of DMart outlets to 377 as of September 30, 2024. Same-store sales growth (SSSG) for stores older than two years reached 5.5% for the quarter, compared to a 7.4% SSSG in H1 FY25, further adding to the cautious sentiment among investors and market experts.
Market Reaction and Stock Downgrade
The underwhelming Q2 results prompted a wave of downgrades from leading brokerage firms. JPMorgan downgraded its rating on Avenue Supermarts, cutting its EBITDA (earnings before interest, taxes, depreciation, and amortisation) estimates for FY25 and FY26 by 8% and 10%, respectively. The firm reduced its target price for the stock to ₹4,700 from ₹5,400.
Bernstein highlighted that Q2 revenue growth was the slowest in four years, with like-for-like (LFL) growth the lowest in three years. The company’s revenue performance, impacted by rising competition from the quick commerce sector, especially in urban areas, is a growing concern.
Nuvama Institutional Equities also reduced its FY25 earnings estimates, cutting revenue, EBITDA, and profit after tax (PAT) forecasts by 3%, 4%, and 7%, respectively. The firm attributed the weaker outlook to increasing competition from online grocery platforms and downgraded DMart’s share price target from ₹5,183 to ₹5,040.
DMart’s Strategic Response
Avenue Supermarts’ management acknowledged the increasing competitive pressure from online grocery platforms, particularly in metropolitan areas. In addition, the company’s management admitted that productivity at certain stores had declined, leading to weaker-than-expected results.
CEO Neville Noronha commented on the challenges posed by the quick commerce sector, which is capturing market share, particularly in urban regions. As part of the company’s response, DMart aims to focus on service-level improvements, although higher operating expenses from this initiative have put pressure on EBITDA margins, which contracted by 27 basis points year-on-year in Q2 FY25.
Future Growth Prospects of Avenue Supermarts
Despite the challenges faced in Q2 FY25, Avenue Supermarts continues to expand its footprint with plans to open more stores across India. The company remains a key player in the Indian retail market, but analysts warn that its ability to maintain strong growth may be constrained by increased competition from the online grocery space and rising operational costs.
Analysts are particularly focused on the company’s strategy to counter the quick commerce disruption and improve the performance of its stores. Investors are also keeping an eye on DMart’s ability to sustain growth in same-store sales and balance the impact of higher costs on profitability.
Conclusion
Avenue Supermarts, the operator of DMart, has faced a tough Q2 FY25, with slower-than-expected growth in revenue and profits. Rising competition from online platforms and higher operating costs have put pressure on the company, leading to a notable drop in its stock price. While DMart continues to grow, the company will need to address these challenges to regain investor confidence and meet market expectations in the upcoming quarters. Investors are advised to closely monitor the company’s performance and strategic initiatives before making further investment decisions.
Overview of DMart
DMart is a leading one-stop supermarket chain in India, offering customers a wide range of essential home and personal products under one roof. Each store is stocked with items such as food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances, and more, all available at competitive prices. The company’s core mission is to deliver quality products at exceptional value, ensuring that customers get more for their money with every purchase.
Founded by Mr. Radhakishan Damani and his family, DMart’s first store opened in Powai, Mumbai, in 2002. Since then, DMart has expanded its presence across 375 locations in states like Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, and Tamil Nadu, among others. With its commitment to being the lowest-priced retailer in each region, DMart continues to grow, with plans for further expansion into new cities.
DMart is owned and operated by Avenue Supermarts Ltd. (ASL), headquartered in Mumbai. The company also owns several in-house brands, including D Mart, D Mart Minimax, D Mart Premia, D Homes, and Dutch Harbour.
Founders
Avenue Supermarts Ltd. (ASL), the parent company of DMart, was founded by Mr. Radhakishan Damani, a renowned investor in the Indian equity market. Known for his business acumen and ethical values, Mr. Damani has built DMart into a profitable and respected retail chain. Under his leadership, the company emphasizes understanding customer needs and providing them with quality products at reasonable prices.
Mission and Vision
DMart’s mission is simple: to identify and offer products that meet the daily needs of Indian families while providing the best possible value. The company works relentlessly to ensure that customers receive more value for their money compared to other retailers, strengthening its reputation as a price leader.
Customer Service Pledge
At DMart, the focus is not just on providing products but also on ensuring excellence in customer service. The company follows three core values—Action, Care, and Truth (ACT)—to maintain high standards of service:
Action: Employees are encouraged to be motivated, enthusiastic, and focused on their tasks, ensuring they achieve their goals with dedication.
Care: DMart fosters a culture of respect and dignity towards both customers and employees. The company listens to grievances and strives for fair and quick resolution.
Truth: Integrity is at the heart of DMart’s operations. The company maintains open, honest, and fair relationships with customers and employees alike.
DMart’s Reach and Expansion
DMart operates in 10 Indian states, 1 Union Territory, and the National Capital Region (NCR). Below is a list of locations across various states:
Maharashtra
Amravati, Aurangabad, Dhule, Ichalkaranji, Jaisingpur, Jalgaon, Jalna, Karad, Kolhapur, Latur, Mumbai (MMR), Nagpur, Nanded, Nandurbar, Nashik, Pune, Ratnagiri, Solapur, and more.
Gujarat
Ahmedabad, Anand, Ankleshwar, Bhuj, Gandhinagar, Rajkot, Surat, Vadodara, Vapi, and more.
Daman
Daman
Telangana
Hyderabad, Karimnagar, Khammam, Warangal
Andhra Pradesh
Anantapur, Guntur, Kakinada, Kurnool, Nellore, Tirupati, Vijayawada, Visakhapatnam, and more.
Karnataka
Bengaluru, Belgaum, Gulbarga, Mangaluru, Tumakuru, Udupi
Madhya Pradesh
Bhopal, Dewas, Indore, Jabalpur, Mandsaur, Ujjain
Chhattisgarh
Bhilai, Durg, Raipur
NCR
Delhi, Faridabad, Ghaziabad, Gurugram, Noida
Tamil Nadu
Chennai, Coimbatore, Dindigul, Erode, Hosur, Madurai, Salem
Punjab
Amritsar, Barnala, Chandigarh, Jalandhar, Ludhiana
Rajasthan
Ajmer, Alwar, Jaipur, Kota
Additional Locations
DMart has a significant presence in smaller towns and cities, ensuring that it reaches a broad customer base. As the company expands, it aims to increase its footprint further in both metros and tier-2/3 cities across India.
Financial Performance and Growth
DMart has experienced significant growth over the years. The company has made several key acquisitions and strategic moves to enhance its business. Below are some major financial and business milestones:
2024
March 2024: Avenue Supermarts Ltd. (ASL) acquired a 26% stake in FP Ampere Energy Private Limited, a subsidiary of Fourth Partner Energy Private Limited.
Revenue: DMart’s total revenue for FY24 was Rs. 50,938.28 crore (US$ 6.12 billion), with Q1 FY25 revenue standing at Rs. 14,069 crore (US$ 1.69 billion).
2023
Acquisition: Founder Radhakishan Damani acquired the Health and Glow beauty and personal care brand.
Q4 Performance: DMart’s revenue for Q4 2023 rose 20% year-on-year (YoY) to Rs. 10,337 crore (US$ 1.25 billion).
2022
Q2 FY23: Consolidated net profit reached Rs. 686 crore (US$ 83.1 million), and total revenue for Q2 stood at Rs. 10,638 crore (US$ 1.28 billion).
2021
Expansion: DMart opened a 94,000 sq. ft. store in Faridabad, marking its entry into Haryana.
Q1 FY22: Revenue stood at Rs. 5,183 crore (US$ 701.07 million).
2020
E-commerce Expansion: DMart converted two Mumbai stores into fulfillment centers to cater to its growing e-commerce operations.
Key Milestones in Earlier Years
2017: Expansion into NCR, Rajasthan, and Daman.
2016: Opened 21 stores, the highest in a single year, bringing the store count to 110.
2014: The number of stores reached 75.
2012: Avenue Supermarts Ltd. became a public company, and the store count crossed 50.
2007: First store opened in Gujarat.
2003: First store opened in Powai, Mumbai.
2001: Incorporation of Avenue Supermarts Private Limited.
DMart’s Brand Portfolio
DMart’s product offerings span several categories, including groceries, daily essentials, home and personal care products, garments, and kitchenware. The company also markets private label brands across a range of categories:
Food & Beverages: DMart offers a variety of grocery items, including staples, fresh produce, and dairy products.
Personal Care: Toiletries, beauty products, and daily essentials are available across all stores.
Home & Kitchen: Kitchenware, bed and bath linen, home appliances, and more are part of DMart’s extensive home utility range.
Apparel: DMart stocks a variety of garments for men, women, and children, as well as specialty home brands like D Mart Premia, D Homes, and Dutch Harbour.
Strategic Partnerships and Collaborations
DMart has partnered with key organizations and entities to support its business operations. One of its notable partners is the India Brand Equity Foundation (IBEF), which has helped DMart expand its brand presence in India and abroad.
Conclusion
DMart’s commitment to offering quality products at affordable prices has made it one of India’s most successful and trusted retail chains. Its continuous expansion, strategic acquisitions, and focus on customer satisfaction have strengthened its position as a market leader. With ambitious plans for further growth, DMart remains a dominant force in the Indian retail sector, providing excellent value to its customers across the country.
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