DMart obsessed with opening new offline stores while Reliance and Tata run after ecommerce

• Shares of Avenue Supermarts (Owner of DMart) closed 1% lower as the company reported less than expected net profit in June quarter, which disappointed investors.
• The company said that it had comparatively more restrictions on store operations in June quarter 2021 than last year.
• The company reported net profit of ₹115 crore, a jump of 130% from ₹50 crore a year ago.

During a global pandemic, when most people are buying groceries and food online, Dmart is continuing to expand its offline presence. The supermarket chain has added 22 new stores after the April-June quarter of the last financial year.

Further, the company is witnessing gradual expansion in its DMart Ready business, a pick up point for customers who can order online.

“The DMart Ready business continued its gradual expansion across the Mumbai Metropolitan Region region, Ahmedabad, Pune, Bangalore and Hyderabad. Thus far the results on topline are very encouraging. The second wave has given further impetus to the business,” the company added in the exchange.

Analysts at Axis Securities highlighted the rising e-commerce adoption by customers as a risk for the company. It expects gradual recovery for one of the largest retail chain companies on disappointing sales per square foot, lower operating hours per day, slower scale up business amid rising ecommerce adoptions like JioMart. It has hence maintained its ‘reduce’ recommendation to investors.

Shares of Avenue Supermarts, owner of retail chain DMart, closed 1% lower, on July 12, as investors were disappointed with the company’s less than expected net profit in June quarter. A consensus estimate by Bloomberg reportedly showed that investors estimated profits of ₹159.7 crore.

Meanwhile, the supermarket chain said that the store needs at least 45 days of unhindered operational time to get back to pre-pandemic sales momentum. This indicates high dependence on physical store sales.

Retail stores have higher operational expenses and require physical presence of the workforce to run smoothly. This may be challenging for such businesses when the country is still not fully vaccinated.

The brick-and-mortar retailer has reported a net profit of ₹115 crore, a jump of 130% from ₹50 crore a year ago.

Revenue surged by nearly a third to ₹5,032 crore from ₹3,833 crore, year-on-year.

Restrictions induced by the global pandemic have impacted the supermarket chain of DMart stores, which earns a large portion of revenues from its physical store sales.

“Q1 FY 2021-22 saw a much stronger second wave of COVID-19 restrictions. We lost significantly more days or had higher restrictions on [the] number of hours of store operations compared to the same period last year, said Neville Noronha, chief executive officer and managing director at Avenue Supermarts in an exchange filing.

However, the company pointed out that they have not seen any significant impact on the supply chain during the quarter. “Our inventory is also gradually moving towards normal levels. Construction activity has also commenced at all our sites,” the company said in an exchange filing on July 10.

Meanwhile, e-commerce startups like BigBasket scooped a good portion of market share during lockdown. Online grocery startup BigBasket, acquired by Tata Group, has clocked gross sales of $1.1 Bn or ₹8,000 crore in FY21, according to a report by Inc42. Grofers reported a revenue of ₹176 crore in FY21, a jump of 84% from FY19.

Reliance’s grocery segment had hit its all-time high revenues with a strong double-digit growth quarter on quarter, the company had said in its FY21 annual report. There has been three times growth in JioMart’s kirana partnerships over the last quarter with a reach of 33 cities.

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