Reduce Avenue Supermarts; target of Rs 4100: ICICI Securities

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ICICI Securities research report on Avenue Supermarts

Accelerated ramp-up of online grocery formats (quick commerce) in large metro cities led to deceleration of key growth metrics for DMART: 1) lowest revenue growth (+14% YoY) in a quarter ever, 2) LFL growth at 5.5% vs high-single digits earlier, 3) Footfalls (bill cuts) declined 1% QoQ vs +4% QoQ in base quarter, 4) Revenue throughput per store was flat YoY. Retail expansion rate (14% YoY) was stable. EBITDA margin was lower by ~30bps due to operating deleverage despite better gross margin (mix-led). Overlap of consumers seeking convenience and shopping at DMART (value) appears to be higher than expected which should continue to impact its growth trajectory.

Outlook

Further, scale-up of DMART Ready continued to be significantly lower (+21% YoY in 1HFY25) vs quick commerce despite lower absolute size. In the context of disruption from quick commerce, we downgrade stock to REDUCE (from Add) with revised TP of INR 4,100

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Avenue Supermarts - 14102024 - icicis