Sharp profit revision, fewer store openings may dent prospects of DMart

Given the near-term sales headwinds, the stock could be under pressure; investors can consider the stock on dips

Muted sales expectations for FY22, fewer store openings, and a higher proportion of low-margin grocery (food) sales have led to sharp earnings downgrades for Avenue Supermarts or DMart for the current financial year.
 
While the margin profile was improving as reflected in the March quarter performance and management commentary, given the lockdown in multiple states, the trend is expected to reverse. The operating profit margin for the quarter was higher by 157 basis points, to 8.3 per cent. The company indicated there had been a revival in discretionary spends not seen in the previous three quarters.
 
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