Avenue Supermarts trades higher for fifth straight day, up 14% in 2 weeks

Analysts believe the gradual unlocking of the nation would lead to positive sales from Q3FY21, supported by improving sales from the general merchandise and apparel category

Shares of Avenue Supermarts, which runs the DMart chain of stores in the country, rose 3.5 per cent to Rs 2,250 on the BSE on Wednesday in an otherwise weak market.

At 12:41 pm, the S&P BSE Sensex was down 1.1 per cent at 40,067 points on the BSE. In the past two weeks, the stock outperformed the market by gaining 14 per cent, as compared to 2 per cent decline in the S&P BSE Sensex.

While announcing the September quarter (Q2FY21) results on October 17, the company’s management said that month-on-month sales have improved during this quarter – August was better than July and September was better than August.

The fast moving consumer goods (FMCG) and staples demand remains robust. September 2020 sales of all stores exceeded September 2019 sales for FMCG and Staples while General Merchandise and Garments did lesser sales in the same period. However, discretionary consumption has seen significant improvement over Q1FY21, it said.

Further, it has expanded its ecommerce operations s (‘D-Mart Ready’) in select pin codes of Pune. Trends indicate enhanced focus on e-commerce owing to change in industry dynamics with grocery e-commerce industry gaining significant traction during the pandemic.

The management said that the progress of the Covid pandemic and its impact on consumer spending during the festival period will determine the company’s financial performance for the next quarter. While large suppliers and FMCG business is trending better on sales as well as supplies, supply chains and manufacturing in the non-FMCG SME sector will take some time to get back to pre-Covid levels. Longer lead times, a slower response to immediate demand and the biggest festivals so close on the anvil would be more complicated for the non FMCG SME sector, it said.

“Robust liquidity position expected to provide impetus to store addition pace (mainly from FY22E onwards). Near term headwinds may have negative impact on the performance in FY21E but we remain structurally positive on the company and its long term growth prospects”, analysts at ICICI Securities said in result update.

Analysts at Motilal Oswal Securities believe, unlike other retailers, grocery retailers catering to essentials have seen swift recovery from Covid-19. "We believe the gradual unlocking of the nation would lead to positive sales from 3QFY21, supported by improving sales from the general merchandise and apparel category," the brokerage firm said in result update.