HomeDMart shares drop after retail giant says footfalls are still short of pre-pandemic levels

DMart shares drop after retail giant says footfalls are still short of pre-pandemic levels

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By CNBCTV18October 17, 2022, 10:58:37 AM IST IST (Published)

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DMart shares drop after retail giant says footfalls are still short of pre-pandemic levels



Shares of Avenue Supermarts, the owner of hypermarkets chain DMart, fell as much as 2.5 percent to Rs 4,200 in early trading on Monday, after the retail giant said that the store footfalls continue to be lower than pre-pandemic levels. The company's earnings missed estimates on the operational front, while revenue growth was led by DMart Ready.


DMart Ready, the company's online delivery service witnessed 82 percent year-on-year growth in its revenue. However, its operating or EBITDA loss widened to Rs 2.85 crore from a loss of Rs 1.57 crore last year.

In its post-earnings commentary, the company said that inflationary stress is more acute at lower price points and that discretionary items in the non-FMCG segment have still not returned to pre-pandemic levels.

For the September quarter, DMart's operating profit increased 33 percent from last year to Rs 892 crore. However, the figure was lower than a CNBC-TV18 poll estimate of Rs 965 crore. EBITDA margin at 8.4 percent was 70 basis points lower than the CNBC-TV18 poll.

The company said that fast-moving consumer goods (FMCG) and Staples performed better compared to general merchandise and apparel.

Also Read: DMart operator Avenue Supermarts investors cheer strong revenue growth

Morgan Stanley believes that the company's miss on the operational front during the September quarter was due to a weak product mix. Among the key positives, it highlighted strong revenue growth, quick scaling of new stores and continued expansion of DMart Ready. It has maintained its "overweight" rating on the stock with a price target of Rs 4,590.

DMart's non-FMCG mix struggling to cross pre-Covid levels is a drag on the company's margins, according to Jefferies. The brokerage has maintained its "hold" recommendation on the stock as it still trades at a steep premium to its pre-Covid average valuation. It has raised its price target from Rs 3,900 to Rs 4,100.

Motilal Oswal has also retained its "neutral" rating on Avenue Supermarts with a price target of Rs 4,100 citing expensive valuations. The brokerage believes that weak demand in the non-food category is hurting revenue productivity on a per square feet basis.
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