Avenue Supermarts, which runs the DMart chain of stores, reported a nearly 48 per cent year-on-year increase in net profit for the quarter ended September 30, (Q2) to Rs 333 crore, as it gained from lower corporation tax rates that came into effect last month.
But the retailer’s top line, while growing 22 per cent year-on-year for the quarter to Rs 5,949 crore, was below Street estimates, which had pegged the number at Rs 6,009 crore.
Earnings before interest tax depreciation and amortisation (Ebitda) at Rs 515 crore for the three months ended September 30 was also below Street estimates of Rs 527 crore.
DMart added five stores in Q2 and is considered one of the most efficient retailers in food and grocery. Analysts said the lower revenue growth is linked in part to the economic environment, which has seen consumers’ cut back not only on discretionary items, but also purchase of essential goods, including biscuits, soaps and detergents. Ebitda margins in Q2 for DMart came in at 8.7 per cent, which was a growth of 70 basis points over the year-ago period. But sequentially, this number was lower compared to the June quarter, when EBITDA margin had touched 10.3 per cent, its sharpest rise in five quarters.
Net profit margin at 5.6 per cent in the September quarter has not only grown by 100 basis points year-on-year, but also sequentially remained in line with the number reported in the April-June period (5.8 per cent).
Analysts attribute the growth in net profit margin to the corporate tax cut announced last month – from 30 per cent to 22 per cent – a point endorsed by DMart’s managing director and CEO Neville Noronha.
Effectively (that is, after taking into account surcharges and education cess) companies like DMart have seen their corporate tax rate come down by nearly 10 percentage points from 35 per cent to 25 per cent, sector experts said.
Since the September 20 announcement, DMart’s stock price has surged to levels of about Rs 1,800 per share from Rs 1,600.
While the company did not specify same-store sales growth for Q2, analysts said it was between 15 and 18 per cent for the period under review. Same-store sales growth is the comparable sales growth of stores that are at least one-year old.