India's DMart slumps nearly 5% on profit miss, margin drop (updated)

Avenue Supermarts

15/05/2023 06:26

(Adds background, analyst commentary, updates share price)
       May 15 (Reuters) - Shares of Avenue Supermarts Ltd
 AVEU.NS , which operates the DMart retail chain, fell 4.7% on
Monday after the company's fourth-quarter profit missed
estimates and core profit margin contracted as consumers curbed
discretionary spending.
    DMart, which faces intense competition from Reliance
Industries Ltd  RELI.NS  and is known for discounts on
everything from pulses to clothes, has seen inflation-weary
consumers tighten spending on non-essential purchases.
    Shares of the company slumped the most in more than a month
and have dropped 9.6% so far this year, as of last close.
    The retailer said in a regulatory filing on Saturday its
earnings before interest, taxes, depreciation and amortization
(EBITDA) margin fell to 7.3% in the quarter from 8.4% in the
year-ago period.
    "Lower consumer spending in General Merchandise and Apparel
continues and has impacted the margin mix downward," CEO Neville
Noronha said in a statement.
        DMart's General Merchandise and Apparel segment, which
sells products including toys, crockery and garments, accounts
for around 23% of the company's revenue.
    Stubborn inflation has delayed a complete recovery in the
category from a COVID-induced downturn, analysts said.
        DMart's profit rose nearly 8% to 4.60 billion rupees
year-on-year, but missed analysts' estimate of 5.21 billion
rupees, according to Refinitiv IBES data, as expenses climbed
22% to 100.02 billion rupees.
        India's retail market is dominated mostly by unorganized
stores, but organized retail is gaining market share and
e-commerce is accelerating.
        Bernstein estimates Reliance Retail, the retail arm of
Reliance, has expanded market share from 1.8% in fiscal 2018 to
around 2.5%-3% in fiscal 2023, and is 2.5 times the combined
size of the DMart, Titan  TITN.NS , and Aditya Birla Fashion and
Retail  ADIA.NS .
        DMart's revenue grew 20.6% to 105.94 billion rupees in
the reported quarter.
        

 (Reporting by Aleef Jahan in Bengaluru; Editing by Sherry
Jacob-Phillips)
 ((aleefjahan.cs@thomsonreuters.com))