Avenue Supermarts Limited, which runs the famous Indian grocery store chain D-Mart, said that its net profit for the October-December 2023 quarter was Rs 690.41 crore, up 17% year-over-year (YoY). The company has now made its biggest quarterly profit ever.
In the third quarter of FY2024, the company’s overall operating income rose 17.31% year over year to Rs 13,572.47 crore, up from Rs 11,569.05 crore in the same quarter last year. There was a lot of growth in the top line because operations slowly got back to normal after COVID-19 limits.
Income before interest, taxes, depreciation, and amortization (EBITDA) at D-Mart rose by over 17% year over year, from Rs 808.43 crore to Rs 948.66 crore. During the quarter being looked at, however, the EBITDA margin fell 30 basis points to 7%.
Costs Remain Under Control Despite Inflationary Pressures
In Q3FY24, Avenue Supermarts’ total costs went up 17.31% year over year to Rs 12,656.46 crore, which was almost the same rate of growth as its income.
Even though inflation is high, the company has done a good job of keeping cost increases in check. Compared to last year, prices went down 30 basis points to 93.3% of sales.
During the quarter, costs for employees went up 20% year over year, and costs for other fees went up 15.4%. But Avenue Supermarts was able to balance out some of these effects by making their operations more efficient and selling more.
On Friday, Avenue Supermarts shares closed 0.57% higher at Rs 4,495.6 on the National Stock Exchange. This came after the company reported its latest earnings after the market closed on Thursday.
Even though the main Nifty 50 index fell 0.4% during the session, this was still the case.
Investors were happy with the company’s strong performance in Q3, when both sales and profit growth sped up from the previous quarter. The stock of Avenue Supermarts has returned 4.48% over the past year, which is a lot more than the Nifty.
Network Expansion Continues Across High-Potential Markets
There are now 302 D-Mart stores in 22 states and the District of Columbia. From October to December 2023, Avenue Supermarts added 22 new stores. The company added 2.4 lakh square feet of store space just in Q3.
The company thinks that underserved tier 2 and 3 towns across India have a lot of room to grow. With these plans, D-Mart will open 120 to 130 new stores over the next 4 years, adding more than 50 lakh square feet of shopping room.
Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Gujarat are some of the states that could be high-value targets. The money for this fast growth will come from internal accruals.
Management Comments on Q3 Performance
Neville Noronha, CEO and Managing Director of Avenue Supermarts Ltd, said this about the Q3 FY2024 results:
“Revenue growth was caused by a lot of people shopping all over the country during the holidays.” Growth that is the same from one area to the next is very healthy. Overall profits did go down a little, though, because general inflation affected all input costs.
He also said, “In the past few years, December has been one of the best months for D-Mart.” During the holidays and the first few weeks of winter, consumers felt good about themselves and bought more.
The company still has faith in the Indian retail sector’s long-term chances. Its goal is to improve the customer experience by giving them more choices and better service in all of its shops.
India doesn’t have as many modern store designs as the rest of the world, so Avenue Supermarts thinks it will have a long time to grow thanks to rising incomes and a good population. There are structural tailwinds coming up for D-Mart over the next ten years. The company has a strong balance sheet and an asset light plan, which will help it take advantage of these.