<ul><li>Post the Q3 earnings of <keyword id="2407038" type="General" weightage="100" keywordseo="dmart" source="Orion">DMart</keyword> operator <keyword id="6410316" type="General" weightage="80" keywordseo="avenue-supermarts" source="Orion">Avenue Supermarts</keyword>, analysts have flagged concerns due to increasing competition from deep-pocketed players.</li><li>Avenue Supermarts’ shares have declined over 9% in 2023 so far and are down 19.8% from their 52-week high of ₹4,609.</li><li>For now, analysts recommend investors adopt a “wait and watch” approach, while maintaining that they are confident about the company’s business moat and see a huge runway for growth.</li></ul>Increasing competition from deep-pocketed players has emerged as a major concern for DMart operator Avenue Supermarts, after the company reported lower-than-expected quarterly profit, despite an uninterrupted festival season. “Multiyear low margins recorded in Q3 FY23 reflect some grave challenges, which could possibly be on account of heightened competitive intensity over the past two years and inflationary stress still pertaining in the discretionary value segment,” said a report by ICICI Direct. On Saturday (January 14), Avenue Supermarts reported a 6.6% year-on-year increase in consolidated net profit to ₹590 crore in Q3, while analysts had<a href="https://economictimes.indiatimes.com/markets/stocks/news/dmart-q3-preview-sales-likely-to-grow-25-yoy-margins-to-remain-under-pressure/articleshow/96970990.cms"> estimated</a> it to rise to ₹672 crore. Even the gross margins remained under pressure and came below analyst estimates – at 14.3% the company’s gross margins were 60 basis points lower year-on-year and below analyst expectations of 15%. On Monday, the first day of trade after it reported its results, the company’s shares tumbled over 4%. Avenue Supermarts’ shares have declined over 9% so far in 2023 and are down 19.8% from their 52-week high of ₹4,609. Since 2020, however, Avenue Supermarts’ stock is up 92%. <div type="image" title="Avenue Supermarts Dmart share price monthly Jan2020 to Jan2023." msid="97052092" hostid="261" caption="&amp;lt;p&amp;gt;Avenue Supermarts&amp;#39; share price since the beginning of 2020&amp;lt;/p&amp;gt;"></div> Explaining the decline, <keyword id="2717470" type="General" weightage="50" keywordseo="neville-noronha" source="Orion">Neville Noronha</keyword>, CEO and managing director, Avenue Supermarts, said, “FMCG and staples segment continued to outperform the general merchandise and apparel segments. Gross margin percentage decline over the corresponding quarter of last year is a reflection of this mix change. Discretionary non-FMCG sales did not do as well as expected in this quarter.” The company also reported lower sales density than pre-pandemic levels at ₹35,900 per square feet, compared to ₹38,700 per square feet in Q3 FY20. It also added only four stores in Q3, below the expectations of analysts at HDFC Securities, and taking its total store count to 306. <cmsannotation type="cmsannotation" annotationid="Increasing competition a worry" comment="subhead" text="Increasing competition a worry">Increasing competition a worry</cmsannotation> One of the deep-pocketed competitors of DMart is <keyword id="58448" type="General" weightage="50" keywordseo="reliance-retail" source="Orion">Reliance Retail</keyword>, which had a network of 16,617 operational stores as of <a href="https://www.businessinsider.in/business/corporates/news/reliance-reports-a-profit-decline-in-q2-even-as-revenue-surges-33-yoy/articleshow/95017302.cms">Q2 FY23</a>. According to analysts at HDFC Securities, DMart’s weak performance is due to multiple factors like increasing competition and elevated inflation. “Channel checks suggest DMart’s weaker unit economics (than usual) is not just a function of high inflation keeping discretionary purchases in check but also a consequence of a fair challenge to DMart’s value proposition by deep-pocketed peers within its top districts,” said a report by HDFC Securities. DMart also has a relatively weak presence in the online space – its e-commerce operations are currently live in only 22 cities, according to the company’s Q3 report. In contrast, Reliance’s JioMart service has a presence in 260 cities. To add more value to its brick-and-mortar network, Avenue Supermarts announced that it is in the process of beginning a pilot pharmacy shop-in-shop in one of its retail stores. <cmsannotation type="cmsannotation" annotationid="‘Wait and watch’ for now, say analysts" comment="subhead" text="‘Wait and watch’ for now, say analysts">‘Wait and watch’ for now, say analysts</cmsannotation> Despite the company’s underwhelming performance in Q3 and the resulting cuts in earnings estimates, analysts recommend investors “wait and watch” for now. “We recommend a wait-and-watch approach as we look for demand recovery triggers,” said a report by Axis Securities. The brokerage expects Avenue Supermarts to gain from a cooling inflation, but cut its net profit estimates by 17% for FY23, and by 7% for FY24. “We believe the company’s overall quality of sales and margin profile is likely to recover in FY24 as the company passes on the RM (raw material) benefits through price reduction and increase grammage as well as due to the RBI’s intervention to curtail overall inflation, which will lead to the overall improvement in throughput,” the Axis Securities report said, cutting the price target by 8.75% to ₹4,000 but maintaining its “hold’ rating on the stock. On Tuesday, the stock was trading 0.3% up at ₹3,691. Analysts at Prabhudas Lilladher maintained a ‘buy’ rating on the stock despite cutting earnings per share (EPS) estimates by 4.2% for FY23 and by 4.3% for FY24. “We believe DMart has a huge runway to grow with 1,500+ store potential (current stores 306) in a consolidated market and scale up in DMart Ready,” the brokerage said in its report. Persistent demand concerns and the lack of any trigger for an upside in the Avenue Supermarts’ stock has resulted in brokerages trimming target prices for the stock. Analysts at Prabhudas Lilladher say a “meaningful correction” from here will be a good entry point to invest in the company. SEE ALSO: <a href="https://www.businessinsider.in/business/startups/news/more-unicorns-focused-on-profitability-now-than-just-burning-cash-as-funding-winter-sets-in/articleshow/97030045.cms">More unicorns focused on profitability now than just burning cash as funding winter sets in</a> <a href="https://www.businessinsider.in/business/corporates/news/hiring-by-it-cos-down-96-in-q3-compared-to-preceding-7-quarters-even-as-attrition-cools/articleshow/97023873.cms">Hiring by IT cos down 96% in Q3 compared to preceding 7 quarters even as attrition cools</a> <a href="https://www.businessinsider.in/business/corporates/news/wipro-results-q3-fy23-wipro-sees-fy23-revenue-guidance-between-11-5-12/articleshow/96969117.cms">Wipro sees FY23 revenue growth at 11.5-12%, Q3 profit growth beats analyst expectations</a>

Competitive intensity a big risk for DMart say analysts after company misses Street’s Q3 forecast

<ul><li><keyword id="6410316" type="General" weightage="80" keywordseo="avenue-supermarts" source="Orion">Avenue Supermarts</keyword>’ shares fell over 3% after the company reported a 160 bps decline in its Q2 margins to 8.4% on Saturday.</li><li>The retail chain operator stated that footfalls are yet to recover to pre-pandemic levels.</li><li>It also reported that inflation has impacted its more profitable discretionary non-FMCG segment, especially at lower price points.</li></ul>Shares of Avenue Supermarts fell over 3% in the first half today, after the retail chain reported a decline in margins in Q2 FY23. Weak market sentiments and fears of recession dragged the<a href="https://www.businessinsider.in/stock-market/news/recession-fears-drag-down-markets-sensex-down-219-points-nifty-by-55-points/articleshow/94907489.cms"> markets down</a>, contributing to Avenue Supermarts trading in the red. The fall in Avenue Supermarts’ shares comes after the company reported a fall in its margins by 160 bps to 8.4% from 8.6% a year ago on account of rising expenses, slower footfall recovery and inflation impacting its more profitable discretionary non-FMCG segment. The sequential decline was worse from 10% in Q1 this year. Overall, Avenue Supermarts’ sales grew ₹10,638 crore at 36.6% year-on-year and 6% sequentially. It added 8 new stores during the quarter. Another challenge that the company faces is the falling revenue per square feet. While this metric has seen a moderate improvement sequentially, at ₹8,580, it is still 6.8% lower than the pre-pandemic level of ₹9,210 per square feet. “Underlying profitability disappoints. Higher bill sizes + lower footfalls aid FMCG profitability/productivity but are a sign of more targeted shopping with little room for discovery-based purchases (courtesy inflationary pressures), which in turn make a dent on the more profitable GM &amp; apparel sales,” said a report by HDFC Securities. “The FMCG and staples segment of the business has performed better than general merchandise and apparel segments. Discretionary items in the non-FMCG segment while recovering have still not come back to pre-pandemic levels,” said Neville <keyword id="1060501" type="General" weightage="50" keywordseo="noronha" source="Orion">Noronha</keyword>, CEO and MD, Avenue Supermarts, explaining how the demand situation is like across its key segments. Noronha also added that the impact of inflation is more acute in the discretionary non-FMCG segment – meaning non-essential products in the non-FMCG category. <keyword id="2407038" type="General" weightage="100" keywordseo="dmart" source="Orion">DMart</keyword> retails a wide variety of products like toys, bedsheets, cosmetics and utensils in addition to small appliances. Coupled with this, a 37% year-on-year increase in expenses to ₹9,926 crore also shaved the company’s margins. Here’s Avenue Supermarts Q2 in numbers: <table class="redcator-table-advance" style="border-width: initial; border-style: none; background-color: rgb(255, 255, 255); font-size: 16px; line-height: 1.6em; box-shadow: none; width: 1032.09px; font-family: Merriweather; padding-bottom: 10px !important; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important;"><colgroup></colgroup><col /><col /><col /><col /><tbody><tr><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Particulars </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Q2 FY23 </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Q2 FY22 </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Change </td></tr><tr><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Revenue </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">₹10,638 crore </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">₹7,789 crore </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">37% </td></tr><tr><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Net profit </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">₹686 crore </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">₹418 crore </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">64% </td></tr><tr><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Net margin </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">6.5% </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">5.4% </td><td style="padding: 5pt; border-width: 0.99375pt; border-style: solid; border-color: rgb(0, 0, 0); font-size: 16px; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">20.2% </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: Company reports <div type="image" title="Avenue Supermarts 01_01_22 to 17_10_22." msid="94912448" hostid="261" caption="&amp;lt;p&amp;gt;Avenue Supermarts share price&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="Here’s what brokerages recommend" comment="subhead" text="Here’s what brokerages recommend">Here’s what brokerages recommend</cmsannotation> Slow recovery in footfalls and inflation are hampering Avenue Supermarts’ margins. A report by ICICI Direct Research states that most of the positives of the company are already captured at current valuations. So a re-rating would be based on the footfall recovery and the company managing to control its operating expenditures. “DMart continues to remain India’s most profitable low cost retailer and a strong play on India’s retail growth story and a key beneficiary of unorganised to organised segment shift. However, we believe current valuations capture most positives,” the ICICI Direct report added. <table class="redcator-table-advance" style="padding-top: 0px; padding-right: 0px; padding-bottom: 10px !important; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px !important; margin-left: 0px; outline: 0px; box-sizing: border-box; border: none; max-width: 100%; background-color: rgb(255, 255, 255); font-size: 16px; list-style: none; border-collapse: collapse; border-spacing: 0px; line-height: 1.6em; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important; box-shadow: none; width: 1032.09px; color: rgb(51, 51, 51); font-family: Merriweather; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: 300; letter-spacing: normal; orphans: 2; text-align: start; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-thickness: initial; text-decoration-style: initial; text-decoration-color: initial;"><colgroup></colgroup><col /><col /><col /><col /><tbody><tr><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Brokerage </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Rating/recommendation </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Target price </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Change </td></tr><tr><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Morgan Stanley </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Overweight </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">₹4,590 </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">7% </td></tr><tr><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">JP Morgan </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">Underweight </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">₹3,445 </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; overflow: hidden; overflow-wrap: break-word;">-20% </td></tr><tr><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">ICICI Direct </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Hold </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">₹4,900 </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">14% </td></tr><tr><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">HDFC Securities </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">Sell </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">₹2,950 </td><td style="padding: 5pt; margin: 0px; outline: 0px; box-sizing: border-box; border: 0.99375pt solid rgb(0, 0, 0); font-size: 16px; list-style: none; vertical-align: bottom; background-color: rgb(217, 217, 217); overflow: hidden; overflow-wrap: break-word;">-31% </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Note: Change as compared to the closing price of ₹4,303 on October 14, 2022 SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tcs-hcl-tech-and-wipro-ring-the-bell-its-time-to-return-to-office/articleshow/94860273.cms">TCS, HCL Tech and Wipro ring the bell – It’s time to return to office</a> <a href="https://www.businessinsider.in/stock-market/news/infosys-shares-surge-after-q2-results-9300-buyback-announcement/articleshow/94850939.cms">Infosys shares surge after Q2 results, ₹9,300 crore buyback announcement</a> <a href="https://www.businessinsider.in/business/corporates/news/infosys-reports-4-revenue-growth-in-constant-currency-announces-9300-crore-worth-buyback-of-shares/articleshow/94838572.cms">Infosys reports 4% revenue growth in constant currency, announces ₹9,300 crore worth buyback of shares</a>

DMart shares fall over margin decline and slow recovery in footfalls

<ul><li>DMart management says that its general merchandise and apparel business has stabilized after Diwali.</li><li>Its Q3 revenue growth has been slower due to muted festive sales, with high inflation eating into staples business.</li><li>It has also slowed down the pace of new store additions even as the sales of its large format stores has improved.</li><li>DMart Ready is yet to show a turnaround but its revenue growth has been strong and net loss percentage has truncated. </li></ul>The third quarter earnings of <keyword id="20044429" type="General" weightage="20" keywordseo="avenue-supermarts" source="keywords">Avenue Supermarts</keyword>, which runs DMart lacked the festive boost, as its consolidated revenues and net profit grew 17% each. Its revenue print is lower than the 19-20% compounded annual growth rate (CAGR) it has been clocking in the last nine quarters. Its foods and non-foods (FMCG) business, which contributes over three quarters of its revenues, has been hit by high-inflation. “This time the festive season sales were lower than expected in non-FMCG. Within FMCG, agri-staples (ex-edible oil) are going through significantly high inflation,” said Neville Noronha, CEO &amp; MD of Avenue Supermarts in its press release. Analysts feel that the impact of inflation might taper off as soon as the macroeconomic situation improves. But the biggest disappointment comes from its per store growth where revenue grew by 5.2% YoY – below 6.5% seen in the second quarter. “Sales per store that accelerated somewhat during 2Q seems to have softened a tad again during 3Q – weaker-than-warranted festive offtakes have impacted non-essential sales and salience with consequential impact on margin as well, in our view. Interestingly, however, management commentaries point to a silver-lining on this front (GM&amp;A),” said J M Financial. Margins to improve only in FY25 Its consolidated operating margin also was flat at 8.3% during the quarter. “A combination of significantly higher store sizes of new stores, which take time to reach stable economics and a soft performance from the high-margin non-staples categories, where demand was impacted by weak footfalls amidst high inflation has been impacting the EBITDA margin,” said Systematix Research. Its high-margin business of general merchandise and apparel (GM&amp;A) too has been reeling from high competition this fiscal year. Systematix expects margins to normalize only in FY25, driven by increased demand on cooling inflation, along with a pick-up in its GM&amp;A business. DMart has been fighting off the onslaught of stores like Zudio and Reliance Trends, and in Q3, the company said that its apparel business ‘stabilized’ post-Diwali. In the first two quarters of this year, its general merchandise and apparel (GM&amp;A) sales contribution to total revenue fell by 150 basis points. It has settled at 23% as of Q3, which is 8% lower than its pre-Covid levels. While management paints a better picture for the times to come, analysts prefer to wait and watch to see how competition would play out. “Although general merchandise and apparel have stabilized in Q3, but loss of sales in apparel is structural and value formats like Zudio and Reliance Trends have reduced the consumer appeal of hypermarts,” says Prabhudas Liladher. It won’t be an easy fight as well. “DMart is likely to struggle in improving its overall store matrix in the near term as delayed recovery in general merchandise sales has continued to impact the margins over the last several quarters,” adds Axis Securities. Good times long-term Despite the challenges, brokerages believe that the company has a long runway for growth. “While store-adds and mix remained weak for many quarters, the worst seems to be behind, in our view. Store additions already underway across the underpenetrated states should support growth ahead,” says Jefferies. DMart has slowed down the pace of new store addition in the third quarter. It added five stores due to land restrictions and rising real estate prices. The size of stores added were also larger indicating a longer gestation period. But, there is a silver lining here too. “The gap between revenue per sqft (up 4% YoY) and revenue per store (up 5% YoY) continue to shrink, indicating an improvement in the share of larger-format stores, marking a positive trend. Further, healthy cost efficiencies and a recovery in discretionary demand are likely to drive growth,” opines Motilal Oswal. The third roadblock that DMart has to clear before it charts a growth path is the turnaround of its e-commerce business. DMart Ready, which is now present across 22 cities, saw its revenues grow by 23% in Q3. Its net loss percentage came in at 14% as compared to 19% in Q3 FY23. Analysts, however, do believe that the company has the ability to build its business in spite of competition from offline and online players. As it expands in under-penetrated states, it offers visibility of growth. But it has to jump a few hoops to chart a full-fledged recovery after a massive Covid hit.

Avenue Supermarts: Many roadblocks to clear on its growth runway

<ul><li>Heightening prices of food and other essential commodities have risen sharply in the past few months across the country due to supply disruption amid Russia Ukraine war.</li><li>Rising inflation across sectors is now leading to slow consumer demand, which impacts volume growth for retail chains like <keyword id="2407038" type="General" weightage="20" keywordseo="dmart" source="Orion">DMart</keyword>.</li><li>This has wiped off $5 billion from Damani’s piggy in 2022 so far.</li></ul>Retail king Radhakishan Damani has lost $5 billion of his personal wealth in 2022 – bringing his fortunes down to $19.3 billion. Though his retail chain DMart is known for the competitive prices of essentials and food items, falling consumer sentiment coupled with high inflation is hitting the purchasing power of the common man badly. Damani is the 77th richest man in the world Damani, who entered the list of Top 100 richest people club last year, is now the 77the richest man in the world. Last year, his stock went on an upswing gaining as much as 70%. This year however analysts have become wary due to <a href="https://economictimes.indiatimes.com/markets/expert-view/dmart-has-no-value-for-new-buyers-at-this-price/articleshow/88803529.cms">expensive valuations and fear that its</a> new store openings might dilute margins. There is also worry that retail in general could be affected by possible disruptions due to modern players. Added to that, macro and global events are affecting its earnings. Its revenue fell nearly 5% sequentially in the Jan-Mar quarter. The company attributed this to the Omicron wave. “January 2022 started extremely well but then the Omicron wave of Covid‐19 reduced the momentum over the middle of the month. These waves typically hurt the high margin and discretionary items more,” said Neville Noronha, CEO and managing director at Avenue Supermarts. The stock slipped fast and low by 21% this year — falling much below the Sensex, which slipped by 6%. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"><colgroup></colgroup><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Stock </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">% change in year-to-date </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Avenue Supermart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-21% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Sensex </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-6.25% </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> <div type="image" title="dmart (1)" height="900" width="1200" msid="92031622" hostid="261"></div> The sticker shock effect vs e-commerce play As FMCG players are increasing prices of food and non-food essentials both due to raw material inflation, sales are slowing down. India’s FMCG sector volume in general declined 4.1% compared to last year due to a decline in consumption across all zones and town classes, reportedly according to a <a href="https://www.business-standard.com/article/companies/india-s-fmcg-sector-grows-at-6-in-q4-volumes-contract-on-low-consumption-122060100606_1.html">Nielsen IQ’s report</a>. “With pick‐up in consumer mobility, high product prices impacted demand for FMCG categories resulting in slower volume growth. That said, food and imported inflation (crude and crude palm oil) dampening consumer sentiments,” said a India Consumer report by Centrum Broking. DMart however said that its FMCG segment is showing signs of recovery due to the value proposition it offers. “In the discretionary non‐FMCG segment, as of now, it is hard to estimate if the relative lower growth is due to a secular change over time due to e-commerce shift or due to inflation or due to significantly higher Covid-related negative economic impact for certain shoppers,” the company said. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[<blockquote class="stocktwits-embedded-post" data-origin="https://stocktwits.com" data-id="464119273"> $DMART.NSE A major Pattern Break has been seen in Dmart. Here are some ideas on what you should do! -&gt; For Traders - Price has approached the structure of previous wave which is CIP level and now Price has confirmed the rejection by mading the Inside bar pattern and confirmed the sell after breaking the lows of inside Bar. -&gt; For Investors - This is not the Right time for Investors to kick in because Dmart is not the market leader of FMCG sector and you must consider that it may available on more discount. The management of the company is same, the product, the environment is the same &amp; it is the best time to do some SIP out the Stock and hold it for next few years! Here, what you can see is that DMART is Bearish on the medium term trend &amp; not an amazing BUY for Investors as a Great company it may available for Good prices at future then look for attractive buy ! @BIIndia &mdash; (@Tradingmonks) <a href="https://stocktwits.com/Tradingmonks/message/464119273"> June 06, 2022</a></blockquote><script async src="https://stocktwits.com/min/widgets.js" charset="utf-8"></script>]]></cdata></div> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/why-a-rate-hike-is-not-all-bad-news-for-you-and-how-you-can-take-advantage-of-rising-interest-rates/articleshow/92029328.cms">Why a rate hike is not all bad news for you – and how you can take advantage of rising interest rates</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="http://www.businessinsider.in/politics/india/news/covid-19-cases-are-on-a-rise-in-india-maharashtra-and-kerala-reporting-the-highest-surge-in-cases/articleshow/92030085.cms">COVID-19 cases are on a rise in India — Maharashtra and Kerala reporting the highest surge in cases</a>

DMart owner Radhakrishna Damani loses $5 bn as even essentials become too expensive for Indians

<ul><li><keyword id="2407038" type="General" weightage="20" keywordseo="dmart" source="Orion">DMart</keyword>’s consolidated revenue stood at a two-year high at ₹9,217 crore last quarter, but it has failed to impress analysts once again.</li><li>Analysts like ICICI Securities have cut the future earnings estimate by 9% for the financial year 2022 as sales from fashion shy away.</li><li>While ICICI Securities has issued a ‘Sell’ call for DMart’s shares, Motilal Oswal has remained ‘Neutral’.</li></ul><keyword id="6410316" type="General" weightage="20" keywordseo="avenue-supermarts" source="Orion">Avenue Supermarts</keyword>, the company that runs retail chain DMart, showed a 24% growth in profit on an annual basis, but the stock has lost 5% since the earnings. The good news for investors is that it has managed to cut costs further. But analysts like ICICI Securities have cut the future earnings estimate by 9% for the financial year 2022 and 1% for the fiscal year 2023. The stock brokerage firm now models revenue growth of 32% by FY2024. The fear is that India's second biggest retailer is not seeing the writing on the wall. “Consensus (continues to) believe that DMart is a linear and secular growth story. We disagree. This analyst's &gt;20 years consumer experience suggests that in India, nuances matter more. We disagree with consensus' over-enthusiasm of BAAP (Buy At Any Price),” ICICI Securities added. <div type="image" title="DMart is focussing on being a cost-effective grocer, but the market wants it to be more than that" msid="88837312" hostid="261"></div> Those fears seem to be valid considering that the sale of fashion and general merchandise categories were down. These are the categories where more consumers have shifted to online purchases. According to a Redseer <a href="https://economictimes.indiatimes.com/industry/services/retail/goods-worth-usd-9-2-bn-sold-online-during-festive-sale-this-year-redseer/articleshow/87662380.cms?from=mdr">report</a> on India’s online festive season sale in the September-December quarter of 2021, the sale of fashion items through online channels doubled. However, DMart’s chief executive officer (CEO) Neville Noronha is clear on what he wants to do for now. "We are seeing higher inflation as an opportunity to make our buying more efficient, our assortment sharper and continue to keep our costs low." Motilal Oswal agrees that the cost optimisation since pre-COVID has enabled DMart to improve its EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins. But one cannot go far without ecommerce. <div type="image" title="DMart is focussing on being a cost-effective grocer, but the market wants it to be more than that" msid="88837321" hostid="261"></div> As per the report by Motilal Oswal, DMART (Avenue Supermarts) needs to be cautious of three factors — competition making significant changes in the business model to go big on ecommerce, the presence of deep-pocketed players such as Amazon and Reliance Retail in this domain, and the overlapping of local markets. Tata too has jumped in this domain with the acquisition of ecommerce player BigBasket, and Amazon and Reliance are stepping on the<a href="https://www.businessinsider.in/newsletter-23-december-2021/binewsletter/88440534.cms"> accelerator by making deliveries faster</a>. Reliance acquired 25% stake in quick commerce company Dunzo last week for a <a href="https://www.businessinsider.in/business/startups/news/mukesh-ambani-led-reliance-retail-has-invested-200-million-in-google-backed-dunzo/articleshow/88734641.cms">whopping $200 million</a>. Players like Swiggy and Zomato-backed Blinkit (Grofers) are too in this domain. DMart Ready — Avenue Supermarts’ subsidiary that focuses on ecommerce — continued to scale-up with an annual growth of 40% to ₹153 crore. This is less than 2% of DMart’s overall revenue. “Watch out for DMart (and modern retail) potentially getting disrupted like how India skipped wireline penetration and jumped directly to wireless,” ICICI Securities added. If the analysts are right, DMart may be the Nokia or Blackberry of this decade. If the management is right, this may be the most audacious stance against the consensus. One for both management and history books. SEE ALSO <a class="tout-title-link" href="https://www.businessinsider.in/business/telecom/news/vodafone-idea-news-the-government-is-now-the-biggest-shareholder-in-vodafone-idea/articleshow/88824061.cms">The government is now the biggest shareholder in Vodafone Idea</a> <a href="https://www.businessinsider.in/personal-finance/news/due-date-for-filing-income-tax-returns-extended-to-march-15-2022/articleshow/88836918.cms">Due date for filing income tax returns extended to March 15, 2022 for individuals whose accounts are to be audited</a> <a href="https://www.businessinsider.in/stock-market/news/paytm-investors-alibaba-owned-ant-group-and-softbank-have-lost-money-on-the-company-too/articleshow/88824714.cms">Not just small investors, even Alibaba-owned ANT Group and Softbank have lost money on Paytm</a>

DMart is focussing on being a cost-effective grocer, but the market wants it to be more than that

<ul><li>DMart’s growth in e-commerce still doesn’t seem as bullish as its competitors.</li><li>DMart in its third quarter earnings said that it’s still going slow with e-commerce with ‘controlled acceleration.” </li><li>The Radhakishan Damani-led company managed to post profits worth ₹470 crore, accounting for a year-on-year growth of 19.3%.</li></ul>One of India’s biggest retail players, DMart, has posted a strong show in its third quarter earnings, but a big part of the investors’ focus was on how India’s second richest man, <keyword id="6505089" type="UNKNOWN" weightage="20" keywordseo="Radhakishan-Damani">Radhakishan Damani</keyword>, geared up for competition from the likes of <keyword id="8506093" type="UNKNOWN" weightage="20" keywordseo="Jiomart">JioMart</keyword>, Amazon and Flipkart. While most brokerages seemed content with the progress made by <keyword id="9012742" type="UNKNOWN" weightage="20" keywordseo="dmart-ready">DMart Ready</keyword> (the e-commerce vertical), the company itself called it ‘controlled acceleration.” <div type="image" title="DMart" msid="80210661" hostid="261"></div> DMart Ready – still going ahead with soft launches By the end of October, 2020, DMart finally gave in to the needs of e-commerce and geared up to take on the next phase of growth with small steps in its online retail offering – DMart Ready. Neville Noronha, CEO &amp; Managing Director of <keyword id="6410316" type="UNKNOWN" weightage="20" keywordseo="avenue-supermarts">Avenue Supermarts</keyword> said that in the third quarter the company continued with the soft launch of DMart Ready in select pin codes of Ahmedabad, Bangalore and Hyderabad. Within their brick and mortar stores, they have also leased space for Avenue E-Commerce Limited (AEL). <div type="image" title="dmart revenue (2)." msid="80210029" hostid="261"></div> But DMart’s growth in e-commerce still doesn’t seem as bullish as its competitors. “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,” he said. Earlier in the second quarter of FY21, the company had said that it would be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. "One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 km," Noronha had said in a statement. Analysts too pointed out the slow growth in e-commerce. "Over the long-term, we like the soft launch of <keyword id="436047" type="COMPANY" weightage="20" keywordseo="Ecommerce">ecommerce</keyword> operations in some cities, however, focus continues to be brick and mortar stores and e-commerce ramp up will be a slow process, in our view," said a report by ICICI Securities. However, analysts also believe that it’s e-commerce steps could make for a substantial long-term growth. “We believe the aggression on e-commerce along with potential market share gains in modern trade channels bodes well for long-term growth sustenance,” said a report by Edelweiss. The report also mentioned competition from heavyweights like India’s richest man Mukesh Ambani’s e-commerce debut JioMart, Walmart-owned Flipkart and global e-commerce giant Amazon as one of the key risks for Avenue Supermarts.“We expect a period of consolidation in the stock with investors waiting to see the impact of aggressive online competition in the grocery space,” said a report by <a href="https://www.financialexpress.com/market/radhakishan-damanis-dmart-hits-fresh-highs-but-analysts-shy-away-from-giving-buy-calls/2168490/">YES Securities</a>. This has further boosted its share price on Monday morning to ₹3,007 (as of 11.15 am). DMart’s stock has already run-up nearly 30% in the last six months and its market cap is nearing ₹2 trillion. <div type="image" title="dmart share jan 11" msid="80210044" hostid="261"></div> Third quarter earnings boost: Brokerages have raised the target price <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"><colgroup></colgroup><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Analyst </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Target Price </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Morgan Stanley </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹3275 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Credit Suisse </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2400 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Jefferies </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹3200 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Edelweiss </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,864 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">JM Financial </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2655 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Motilal Oswal </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2850 </td></tr></tbody></table> SEE ALSO: <a href="https://www.businessinsider.in/tech/apps/news/with-whatsapp-popularity-hit-zoho-plans-to-launch-arattai-messaging-app/articleshow/80206802.cms">Zoho plans to woo WhatsApp defectors with its own messaging app Arattai</a> <a href="https://www.businessinsider.in/business/startups/news/2021-will-be-a-watershed-moment-for-india-tech-ecosystem-here-are-the-startup-sectors-that-vcs-are-betting-on/articleshow/80208631.cms">‘2021 will be a watershed moment for India’s tech ecosystem’ — here are the startup sectors that VCs are betting on</a>

Pitted against JioMart, Amazon and others, Radhakishan Damani’s DMart has opted for “controlled acceleration” in e-commerce

<ul><li>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. </li><li>The company said that it had comparatively more restrictions on store operations in June quarter 2021 than last year. </li><li>The company reported net profit of ₹115 crore, a jump of 130% from ₹50 crore a year ago.</li></ul>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 <a href="https://www.bloombergquint.com/business/dmart-q1-results-profit-misses-estimates-as-second-wave-hits">Bloomberg reportedly </a>showed that investors estimated profits of ₹159.7 crore. <div type="image" title="DMart stores" height="900" width="1200" msid="84346944" hostid="261"></div> 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. <div type="image" title="DMart revenues" height="900" width="1200" msid="84346969" hostid="261"></div> Restrictions induced by the global pandemic have impacted the supermarket chain of <keyword id="9289879" type="UNKNOWN" weightage="20" keywordseo="dmart-stores">DMart stores</keyword>, 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. <div type="image" title="DMart shares" height="900" width="1200" msid="84346984" hostid="261"></div> 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 <a href="https://inc42.com/buzz/bigbasket-claims-1-bn-gross-sales-in-fy21-expects-fy22-to-be-even-bigger/">report by Inc42</a>. 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. SEE ALSO: <a href="https://www.businessinsider.in/business/startups/news/fashion-retailer-hm-has-led-a-45-million-round-in-video-discovery-and-commerce-app-trell/articleshow/84342711.cms">Fashion retailer H&amp;M has led a $45 million round in video discovery and commerce app Trell (businessinsider.in)</a> <a href="https://www.businessinsider.in/business/startups/news/fashion-retailer-hm-has-led-a-45-million-round-in-video-discovery-and-commerce-app-trell/articleshow/84342711.cms"></a><a href="https://www.businessinsider.in/business/startups/news/paytm-money-users-can-now-apply-for-zomato-ipo-from-today/articleshow/84334784.cms">Paytm Money users can now apply for Zomato IPO from today (businessinsider.in)</a>

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

<ul><li><keyword id="2407038" type="PERSON" weightage="20" keywordseo="DMart">DMart</keyword> is now ready to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready.</li><li>The COVID-19 pandemic impact continues to reflect in the second quarter results of the company as DMart’s year-on-year profits fell by 37% to ₹211 crore.</li><li>DMart, when compared to its other offline retail peers, has cracked the code of brick and mortar retailing but falls far behind others in online retailing.</li></ul>With falling profits, and rising competition from JioMart, Amazon, Flipkart, among others, <keyword id="6505089" type="UNKNOWN" weightage="20" keywordseo="Radhakishan-Damani">Radhakishan Damani</keyword>’s DMart is finally making strides into the e-commerce world. The COVID pain continues to reflect in the company’s earnings for the second consecutive quarter. DMart’s year-on-year profits fell by 37% to ₹211 crore, while its revenue for the quarter ended September fell by 12.3% to ₹5,218 crore. But despite the yearly fall in profits, DMart’s quarterly rise in revenue and profits, and plans to double down on e-commerce brought in some cheer in the markets. On Monday morning, DMart’s stock was up over 2%. <div type="image" title="DMART LATEST 1." msid="78743942" hostid="261"></div> Getting ‘ready’ for e-commerce And DMart is now ready to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready. The company has said that it will be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. “One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 kms,” Neville Noronha, CEO &amp; Managing Director, Avenue Supermarts Limited, said in a statement. The company is also expanding its e-commerce offerings in Mumbai as well as select pincodes in Pune. “We continue to increase our footprint in the Mumbai Metropolitan Region covering additional pin codes. Mira Road and Kalyan FC addition was to deepen our reach and serve customers better in these regions,” said Noronha. DMart already has a registered entity called Avenue E-commerce, where the company had invested ` ₹252.76 crore as of March 31, 2020. DMart vs others – a king in brick and mortar but online push needed DMart, when compared to its other offline retail peers, has cracked the code of brick and mortar retailing and falls only short of the mammoth Reliance Retail. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"><colgroup></colgroup><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Revenue per sqft </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Reliance Retail </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">45,424 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">DMart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">36,307 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">More` </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">20,268 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Spencer </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">15,975 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Star Bazar </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">24,625 </td></tr></tbody></table>Source: Edelweiss report But when it comes to online retailing, DMart falls far behind others. Analysts too have been waiting for DMart’s ‘second phase of growth’. “We believe time is ripe for players to get the model right before scaling it up. While DMart has cracked B&amp;M retailing, it has treaded cautiously in online retailing. A comparison with other providers shows DMart Ready must ramp-up in many categories, if it has to replicate its offline success online,” said a report by Edelweiss from September 23. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"><colgroup></colgroup><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Online presence in cities </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">JioMart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">200 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Amazon Pantry </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">300 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">BigBasket </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Grofers </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">27 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Flipkart Supermart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">26 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">DMart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1* </td></tr></tbody></table>Source: Edelweiss report *DMart recently announced that it’s expanding to Pune, taking the total to two cities. Experts agreed that DMart would face pressure from new retail. “In our view, the company may face some margin pressures in the short term due to increased pressure from E-com players,” said analysts at Antique in a report on October 19. Falling footfalls further make a case for online operations It’s not just the rising e-commerce play of Mukesh Ambani’s JioMart that is causing Damani to take the plunge into online retail. It’s also the fact that footfalls continue to be lower in DMart stores. The company said that footfalls continue to be ‘significantly lower’, but basket values are increasing. Although the company opened six new stores in the quarter, DMart stores, which are two years and older, managed to do 87.5% of September 2019 sales in the month of September 2020. DMart currently has 158 (out of the total 220) stores that are two years and older. SEE ALSO: <a href="https://www.businessinsider.in/business/ecommerce/news/indians-are-ordering-a-lot-more-online-but-for-cheaper-products/articleshow/78675417.cms">Indians are ordering a lot more online but for cheaper products</a>

DMart gets ready to take on JioMart – falling profits and footfalls, and competition push Radhakishan Damani towards e-commerce

<ul><li><keyword id="6505089" type="UNKNOWN" weightage="20" keywordseo="Radhakishan-Damani">Radhakishan Damani</keyword>'s <keyword id="2407038" type="PERSON" weightage="20" keywordseo="DMart">DMart</keyword> is aware of the rising influence of e-commerce in India's grocery sector. Still, it was only in October 2020 that it finally took some serious steps to go online. </li><li>And its third-quarter earnings will reflect whether it has managed to make any inroads into the e-commerce sector. </li><li>DMart is facing increasing challenges from India's richest man Mukesh Ambani's JioMart, and the e-commerce giants Amazon, Flipkart, BigBasket, and Grofers.</li><li>However, analysts are bullish on DMart and its expertise in the offline FMCG segment, which would boost sales in the festive season.</li></ul>DMart, one of India's big success stories in retail, knows that it faces rising competition from India's richest man Mukesh Ambani's JioMart, Walmart-owned Flipkart, the world's biggest e-commerce player Amazon and that it can't shy away from e-commerce. A Goldman Sachs report from November 2020 pegs that India's online grocery segment is set to grow 18 times over the next ﬁve years to reach $37 billion in GMV by FY25E. Damani's DMart is also aware of the rising influence of e-commerce in India's grocery sector. At the end of its last quarter earnings in October, DMart finally gave in to the needs of e-commerce. DMart geared up to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready. The company had said that it would be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. "One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 km," Neville Noronha, CEO &amp; Managing Director, Avenue Supermarts Limited, had said in a statement. And now its third-quarter earnings will reflect whether it has managed to make any inroads into the e-commerce business. However, analysts are bullish on DMart and its expertise in the FMCG segment, which would have increased its sales in the festive season. "We expect Avenue Supermarts to report double-digit revenue growth in the third quarter of the financial year. The management had indicated that its core' food &amp; FMCG' segment reverted to a positive growth trajectory whereas GM &amp; apparel categories are nearing their pre-Covid levels owing to strong demand in the festive season," said a report by ICICI Securities. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"><colgroup></colgroup><col /><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">DMART </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">July-September earnings </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">October-December Analyst Expectations </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Revenue </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹5218 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹7340 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">PAT </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹211 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹405 crore </td></tr></tbody></table>Analyst source: ICICI Securities Another factor to watch out for would be DMart's footfalls in stores. During its second-quarter earnings, the company had said that footfalls continue to be 'significantly lower', but basket values are increasing. According to <a href="https://economictimes.indiatimes.com/industry/services/property-/-cstruction/d-marts-radhakishan-damani-set-to-acquire-8-acre-thane-plot-from-mondelez/articleshow/80108347.cms?from=mdr">reports,</a> DMart’s Damani is also set to acquire an 8-acre plot from Mondelez India for as much as ₹250 crore. Meanwhile, India's second-richest man Radhakishan Damani has been having a strong run in the stock market. DMart's share price has risen by 27% in the last six months, scaling the ₹2 trillion market cap for a few hours, on January 6, 2021. <div type="image" title="dmart share price jan (1)" msid="80173053" hostid="261"></div> And now, DMart will have to prove its mettle. SEE ALSO: <a href="https://www.businessinsider.in/business/startups/news/oyo-bags-a-7-4-million-cheque-as-pandemic-forces-ritesh-agarwal-to-reimagine-the-business/articleshow/80170847.cms">OYO bags a $7.4 million cheque as pandemic forces Ritesh Agarwal to reimagine the business</a>

DMart, the nearly ₹2 trillion Indian retailer, may post strong earnings ⁠— watch out for the progress on e-commerce

<ul><li>One of India’s largest retailers, <keyword id="2407038" type="PERSON" weightage="20" keywordseo="DMart">DMart</keyword> has seen its share price grow by 35% in the last one year, going beyond its pre-COVID levels.</li><li>DMart has shown that it has broken away from the COVID-19 inflicted pain, as it posted a 16% rise in net profit of ₹447 crore for the December quarter.</li><li>The company is also slowly gaining traction with its e-commerce vertical <keyword id="9012742" type="UNKNOWN" weightage="20" keywordseo="dmart-ready">DMart Ready</keyword>.</li></ul><keyword id="6505089" type="UNKNOWN" weightage="20" keywordseo="Radhakishan-Damani">Radhakishan Damani</keyword>, India’s second richest man, has a lot to be happy about as his retail venture DMart has now crossed ₹2 trillion in market cap. One of India’s largest retailers, DMart, registered as Avenue Supermarts Ltd, has seen its share price grow by 35% in the last one year, going beyond its pre-COVID levels. <div type="image" title="DMART SHARE" msid="81054592" hostid="261"></div> DMart has shown that it has broken away from the COVID-19 inflicted pain, as it posted a 16% rise in net profit of ₹447 crore for the December quarter. Its revenue was also up by 10% at ₹7,542 crore. “The company targets lower-middle, middle, and aspiring upper-middle-income consumers for whom value for money plays an important role. Despite larger revenue dominated by food and grocery business (52% of revenue) coupled with thin margins (8.6% EBITDA margin), DMart provides lowest cost offerings to customers consistently, in turn gaining loyalty, a key factor for driving footfalls,” said a report by Axis Securities dated February 8. Additionally, DMART through its FY20 QIP had raised ₹40.78 billion, out of which ₹25.43 billion remains unutilised. “DMart is strengthening its presence in the Western and Southern region. We are witnessing a complete transformation of retail – from unorganized to organized. I recently went to a DMart store and was amazed by the crowds. DMart stores have the quickest turnaround time to breakeven,” Kranthi Bathini, equity strategist at WealthMills Securities told Business Insider. <cmsannotation type="cmsannotation" annotationid="DMart Ready – slow, but steady" comment="subhead" text="DMart Ready – slow, but steady">DMart Ready – slow, but steady</cmsannotation> DMart is also slowly gaining traction with its e-commerce vertical DMart Ready. Neville Noronha, chief executive and managing director of Avenue Supermarts in a statement during its third quarter results said that the company continued with the soft launch of DMart Ready in select pin codes of Ahmedabad, Bangalore and Hyderabad. Within their brick and mortar stores, they have also leased space for Avenue E-Commerce Limited (AEL). A quick sweep through professional networking firm LinkedIn shows that DMart is also hiring actively for its e-commerce venture. “DMART has established an extensive cluster-based distribution network comprising 220 stores and 225 DMART Ready stores as of Q2FY21. The cluster-based approach has reduced the distribution and inventory cost for the company in turn bettering margins,” said the Axis Securities report. <cmsannotation type="cmsannotation" annotationid="Billionaire Damani gets richer" comment="subhead" text="Billionaire Damani gets richer">Billionaire Damani gets richer</cmsannotation> Damani, who is also one of India’s biggest stock traders, launched Avenue Supermarts that runs DMart chain of stores in 2000. Since then, he has grown DMart to one of India’s big retail companies giving competition to Mukesh Ambani’s Reliance Retail. Damani has also accumulated wealth in the process being second only to Ambani in India’s rich list. <div type="image" title="Damani wealth" msid="81054693" hostid="261"></div> SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/indian-hotel-companies-have-shown-resilience-during-the-pandemic-and-now-the-markets-are-celebrating-them/articleshow/81032369.cms">Indian hotel companies have shown resilience during the pandemic and now the markets are celebrating them</a> <a href="https://www.businessinsider.in/science/space/news/a-japanese-supercomputer-is-on-a-mission-to-find-out-how-our-universe-went-from-nothing-to-everything-in-less-than-a-microsecond/articleshow/81048254.cms">A Japanese supercomputer is on a mission to find out how our universe went from nothing to everything in less than a microsecond</a>

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Pitted against JioMart, Amazon and others, Radhakishan Damani’s DMart has opted for “controlled acceleration” in e-commerce

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DMart gets ready to take on JioMart – falling profits and footfalls, and competition push Radhakishan Damani towards e-commerce

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DMart, the nearly ₹2 trillion Indian retailer, may post strong earnings ⁠— watch out for the progress on e-commerce

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DMart is now a ₹2 trillion company – Radhakishan Damani has many more cards to pull, the first being e-commerce

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