The share price of Avenue Supermarts, operator of retail chain D-Mart, closed 1.45 percent lower on January 13, a day ahead of its Q3 results announcement. The Street is expecting a consolidated net profit of Rs 646.5 crore, indicating a 17 percent year-on-year (YoY) growth but a 5.5 percent drop sequentially.
“Q3 started on a steady note with retail companies witnessing strong demand offtake during the festive season (Navratri-Diwali). However, demand momentum started waning off during November and December,” according to ICICI Securities.
Consolidated revenue from operations is expected to come in at Rs 11,504 crore, growing 25 percent YoY and 8.1 percent sequentially. EBITDA (Earnings before interest, tax, depreciation and amortisation) is seen at Rs 1,010 crore, up 16.6 percent YoY and 13.4 percent QoQ.
In its Q3 business update, the company said it added four stores in the October-December quarter taking the total count to 306. "Estimates stood at 12," said analysts at Motilal Oswal Financial Services. In Q1, the company had added 10 stores, followed by eight in Q2.
The hypermarket chain operator reported standalone revenue from operations at Rs 11,304.58 crore for the quarter ended December FY23, increasing 25 percent from Rs 9,065 crore in the same period last year. Both store additions and revenue growth were lower than Street estimates.
A key factor to watch in the results announcement will be gross and operating margin numbers. ICICI Securities expects EBITDA margins to contract by 60 basis points YoY to 8.8 percent. This will largely be on the back of seasonal weakness, said analysts.
During the Q2 results announcement, the management highlighted that the FMCG and staples segment of the business had performed better than the general merchandise and apparel segments. The inflationary stress is more acute at lower price points in the discretionary non-FMCG category, the company had said.
Analysts and investors will be keenly monitoring if there’s any improvement in the revenue share of general merchandise and apparel segments, which are the higher margin businesses.
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