DMart slips 8%, hits over 3-month low; down 12% in 3 days post Q3 results

Shares of Avenue Supermarts, which owns and operates retail chain D-Mart, hit an over three-month low of Rs 4,165 and slipped 8 per cent on the BSE in Wednesday’s intra-day trade on the back of heavy volumes.

In the past three trading days, the stock has dipped 12 per cent, after the company reported a mixed bag of results for the quarter ended December 2021 (Q3FY22) as margins were tad below analyst estimates. The stock was trading at its lowest level since September 16, 2021.

At 02:15 pm, Avenue Supermarts was trading 5 per cent lower at Rs 4,289, as compared to a 0.61 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped over five-fold with a combined 2.13 million equity shares having changed hands on the NSE and BSE.

For Q3FY22, the company reported a 22 per cent year on year (YoY) increase in its revenue growth to Rs 9,218 crore. Profit after tax for the quarter grew 24 per cent YoY to Rs 552 crore.

Gross margins declined marginally to 15.4 per cent on account of unfavourable product mix. However, owing to positive operating leverage, earnings before interest, taxes, depreciation, and amortization (ebitda) margins improved 30 bps YoY to 9.4 per cent.

The management said overall gross margins are marginally lower due to mix deterioration. General merchandise and apparel business is consistently seeing relatively lesser sales contribution, while essentials and FMCG is doing better. Inflation and lesser opportunities to go out are negatively impacting certain categories more than others, it said.

The management indicated that it continues to monitor the current situation, wherein the trend in sales and footfall will depend on any local pandemic related restriction on trade activities.

Rise in covid cases in key states such as Maharashtra (32 per cent of stores) and Gujarat (18 per cent of stores) and restrictions such as shopping complexes being allowed to operate at 50 per cent capacity would again lead to dip in footfalls in Q4FY22. Given its resilient business model and healthy balance sheet, we anticipate the company will tide over the current unprecedented scenario, said ICICI Securities in its result update.

Based on the commentary, we anticipate greater impact on the sub-category of apparel & footwear within GM & Merchandise. DMart managed to keep a check on expenses, due to which EBITDA margin at 9.7 per cent came in line with estimates, analysts at Edelweiss Securities said.