According to Noronha, the company typically experiences increased store openings during the March quarter.
Avenue Supermarts, the second-largest retailer in the country operating the DMart chain of stores, aims to be recognized primarily as a grocer, according to CEO & MD Neville Noronha. In a conversation with FE, he highlighted the company’s commitment to the grocery segment, considering it their primary focus amid the evolving dynamics of the retail industry.
The retailer recently reported a robust 17.31% year-on-year growth in consolidated revenue, reaching Rs 13,572.47 crore for the October-December period. This growth was primarily driven by strong sales in the food and grocery categories. The consolidated net profit for the same quarter saw a year-on-year increase of 17.09%, totaling Rs 690.41 crore. However, operating margins experienced a slight dip, settling at 8.25% in Q3 compared to the 8.34% reported in the previous year.
Acknowledging slow festive season sales in non-fast-moving consumer goods (non-FMCG) and discretionary categories, the retailer noted a favorable post-Diwali sales trend in general merchandise and apparels (GM&A).
Neville Noronha acknowledged that the contribution from general merchandise and apparel has stabilized, and positive trends have emerged post-Diwali. However, he conceded that the rise of specialized players in apparel retail has impacted DMart’s performance in that category.
Industry analysts have highlighted the growth of the value apparel retail format in India, with players like Trent’s Zudio, Shoppers Stop’s Intune, Max Fashion, and Reliance Retail’s Yousta gaining traction. This trend has encroached on the sales of retailers like DMart, which includes value apparel products in its stores.
Noronha remarked on the ongoing impact, stating, “The secular trend has been the emergence of a lot of specialists who have come into the market notably on the apparels side. This has impacted us a little bit. While there is a bit of slack from our side, we are working on it.”
As per industry experts tracking the company, DMart generates approximately 56% of its revenue from foods, 21% from non-food FMCG, and 23% from general merchandise and apparels (GM&A). Before the onset of the Covid-19 pandemic, GM&A accounted for almost 27-29% of Dmart’s revenue.
Industry analysts suggest that a resurgence in general merchandise and apparel sales bodes well for DMart, as the company earns higher margins from this segment compared to food and FMCG.
G Chokkalingam, founder and MD at Mumbai-based Equinomics Research, highlighted, “Though food and FMCG is a high sales-volume driver, for a better margin profile, it is sales from general merchandise and apparels that can aid performance.”
In the December quarter, DMart opened five new stores, a decrease from the nine reported in the September quarter and the three seen in the June quarter.
Neville Noronha noted that the March quarter traditionally sees a higher number of store openings for the company.
“Traditionally, our store openings have been concentrated in the March quarter. This is primarily due to the weather pattern in the country, where much of the pending work on stores tends to get completed post the monsoons,” he explained.
Historically, the company has opened an average of 15-20 outlets in the March quarter over the years. This trend is anticipated to continue in FY24, with the retailer planning a substantial number of new store additions in Q4.
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