Avenue Supermarts Ltd.’s quarterly profit fell, hurt by lower footfalls and weak sales of non-essential items as the economy begins to open up following a series of lockdowns that were imposed to curb the Covid-19 outbreak.
Net profit of the operator of the DMart chain of hypermarkets fell 38% year-on-year to Rs 199 crore in the quarter ended September, according to an exchange filing. That compares with the Rs 239.5-crore consensus estimate of analysts tracked by Bloomberg.
- Operating profit declined by 36.5% to Rs 329 crore.
- Operating margin stood at 6.2% compared to 8.6% a year ago.
- Revenue declined 11% year-on-year to Rs 5,306 crore, compared to the consensus estimate of Rs 5,390.8 crore.
Even as footfalls at DMart stores continued to remain lower during the quarter compared to pre-Covid levels, the hypermarket chain has witnessed a month-on-month improvement in sales during the second quarter.
Yet, basket values are significantly higher than pre-Covid levels, the company said. But as footfalls increase, the company said basket values are reducing on a month-on-month basis.
“Two years and older DMart stores did 87.5% of September 2019 sales in September 2020,” Neville Noronha, chief executive officer and managing director of Avenue Supermarts, was quoted as saying in a statement. The company has 158 stores which are two years and older. In total, it has a total of 220 stores across 12 states and union territories as on Sept. 30.
Demand for consumer goods and staples remain robust and its sales in September was higher than in the corresponding month a year ago. However, sales of general merchandise and garments sales were low in the same period.
The demand for discretionary products improved on a sequential basis. DMart’s revenue contribution from general merchandise and apparel business stood at 22.7% compared to 27.3% a year ago.
“We couldn’t sell this category of products for nearly two months of Q1 FY21 due to regulatory restrictions and once permitted we did insignificant sales due to tightening of discretionary spend by consumers,” Noronha said. He also said almost all of the shopping in Apirl-June quarter was need-based and essential in nature, thus sales of general merchandise and apparel sales in second quarter was encouraging.
With DMart Ready, its smaller format stores, the company increased its footprint in Mumbai Metropolitan Region as it covered additional pin codes. It has also expanded its e-commerce operations in select pin codes in Pune.
DMart expects the progress of the pandemic and its impact on consumer spending to affect its financial performance in the next quarter. “While large suppliers and FMCG business is trending better on sales as well as supplies, supply chains and manufacturing in the non-FMCG SME sector will take some time to get back to pre-Covid levels,” the statement read.
The retailer also said conversations are now moving from lack of demand to shortage of supplies across categories.