Rakesh Damani-led Avenue Supermarts (DMart) is set to present its earnings report for the first fiscal quarter of FY25 on July 13. High productivity and additions in footprints are likely to drive the retail major’s sales in the high-teens.
According to a Moneycontrol poll, the DMart parent is expected to record a 17.5 percent on-year rise in revenue to Rs 13,938 crore. Net profit is likely to surge 21 percent from Rs 659 crore in the corresponding quarter in the previous fiscal to Rs 798 crore.
Earnings estimates of analysts polled by Moneycontrol are in a narrow range, so any positive or negative surprises may elicit a sharp reaction in the stock.
What factors are driving the earnings?
Top factors driving earnings are rising revenue per square foot, stable margins and store additions.
"DMart's revenue is likely to grow at 18 percent YoY driven by higher inflation and store expansion. We expect a marginal improvement in the sale of general merchandise as consumer sentiment improves," said Antique Stock Broking.
Rising revenue per square foot: Over the past four quarters, the revenue per square foot has been on the rise. In comparison, during the preceding three years, the revenue per square foot remained subdued due to the addition of large-size stores and weak discretionary spending (which has a revenue contribution of 23-25 percent).
“This trend has been reversing gradually for the last 4-5 quarters, which is evident from the narrowing gap between revenue/store growth and revenue/sqft growth,” said Motilal Oswal.
Store additions: Besides, during the quarter gone by, Avenue Supermarts added six stores over the quarter, taking its total store count to 371 stores across the country. In the fourth quarter of the previous financial year, DMart added 24 stores. In the same quarter last year, Avenue Supermarts' store count increased by three stores.
Stable margins: Gross margins are likely to be stable, with general merchandise & apparel (GM&A), which is a high-margin segment, seeing its contribution improve. “We expect DMart to report a gross margin of 14.6 percent, compared to 14.6 percent in Q1FY24 and a pre-Covid Q1 average of 15.7 percent,” said Nuvama Institutional Equities.
What to look out for in the quarterly show?
Analysts will be closely looking at the SSSG, also known as the same store sales growth. They will also monitor the change in revenue per square foot, along with the gap between the revenue/store and revenue/sqft.
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