Record sales, first profit growth in 3 quarters
Avenue Supermarts’ 16 per cent YoY rise in consolidated profit for the December quarter came after two quarters of negative growth. The company had reported a 38.46 per cent drop in September quarter profit and 87.59 per cent plunge in June quarter numbers due to lockdowns and low footfalls.
In case of revenues, the 10.76 per cent growth in December quarter sales was seen after a 11.42 per cent decline in September quarter revenues and 33.21 per cent fall in the June quarter sales. That said, at Rs 7,542 crore, the company’s sales were highest ever in the December quarter.
The company added only one store in the third quarter. This was against six store additions in the September quarter.
In the first nine months of FY21, the company has added nine stores and closed two stores that were converted into fulfillment centers for its e-commerce business.
Overall, the company had 221 operating stores with retail business area of 8.17 million square feet (adjusted for space leased to AEL during the quarter) across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.
The company said it intends to continue extended store operating hours. “This is allowing us to serve our customers in a more safe and efficient way,” it said.
DMart said December month did not prove as good as the festival months of October and November.
It noted that 162 of its two years and older-DMart stores did 96 per cent of December 2019 sales. Restricted store operations in certain cities post Diwali due to night curfews and weekend closure led to significantly larger declines in those stores versus the same period last year, the company said.
Low footfalls, high basket values
As noted in its September quarter earnings as well, the company said it continues to see lesser trips and higher basket values.
“While there is a general reduction in basket values compared to peak pandemic levels, they still continue to be relatively higher than pre Covid-19 levels,” it said.
The company said it continued to face inconsistent supplies from the non-FMCG sector. Raw material prices are also going up, it said.
“Availability in certain categories is likely to get worse before getting better. This could, therefore, have an impact on sales mix and margins in the near term,” the company said.
DMart Ready’s soft launch in new cities
The company said it soft launched DMart Ready in select pin codes of Ahmedabad, Bangalore and Hyderabad.
In addition, the company leased some part of the space at its brick and mortar stores to Avenue E-Commerce (AEL) to commence e-Commerce operations in those cities.
“Post Covid-19 environment is creating opportunities to launch DMart Ready in more cities. However, we will continue with our approach of small trials, reviews and controlled acceleration for DMart Ready,” it said.
Edelweiss said that Avenue Supermarts’ revenue beat signalled better than expected recovery.
“FMCG companies are also highlighting that Modern Trade is back to growth trajectory. We see market share gains for rest of players as Big Bazaar struggles due to group level issues. Also cost structure has improved as other expenses are down compared to last year despite higher revenues. Will be important to watch out sustenance of this,” it said,
Edelweiss said that the key highlight for the quarter has been the aggression in ecommerce. “First time company has separately given commentary on DMart Ready. It has also entered 3 new cities and had soft launched in Pune last quarter,” the brokerage said.