DMart’s recovery path is turning weary for investors
₹40,101 DMart achieved in Q3FY20," said analysts from Nuvama Institutional Equities. DMart added five new stores last quarter taking the total count to 341 with a retail business area of 14.19 million square feet. For the nine-month ended December, 17 stores were added vis-à-vis 22 in the same period last year.
In view of slower store additions, some analysts have cut their store addition assumptions for FY24. “While the earning cuts in earlier quarters were driven by muted showing on productivity and lower general merchandise and apparel (GM&A) share, this quarter we have to adjust our store addition guidance downward to 32 from 45 earlier," said Nuvama’s analysts in a report on 13 January. Adjusting for this, the brokerage’s profit after tax estimate for FY24 and FY25 is lower by 1% and 3%.
The encouraging bit from Q3 commentary in Avenue’s press release is that the contribution from the high-margin GM&A segment has stabilized and the trends are encouraging post-Diwali. Note that this segment has been a pain point for the company in the past few quarters, weighing on the overall mix. This can be attributed to competition in the apparel segment from the likes of Trent’s value concept Zudio and Reliance Trends.
Moreover, inflationary pressures may have led to consumers tightening their purse strings when it comes to discretionary purchases. On the other hand, festive season sales for Avenue were below expected in the non-FMCG segment. FMCG is fast-moving consumer goods.
“Within FMCG, agri-staples (ex-edible oil) are going through significantly high inflation," said Avenue’s chief executive officer & managing director, Neville Noronha. Overall, investors are not celebrating Q3 results as such. On Monday, Avenue’s shares
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