Avenue Supermarts DMart , the parent company of DMart retail chain, has reported a 16.2% year-on-year increase in total revenue for the first quarter, despite facing challenges from price reductions in essential items.

Revenue Growth and Profit

The company's total revenue stood at ₹15,932.00 crore for Q1, up from ₹13,712.00 crore in the same period last year. However, the net profit saw a modest increase of 2.1%, reaching ₹830.00 crore compared to ₹812.00 crore in the corresponding quarter of the previous year.

Impact of Price Reductions

DMart disclosed that its revenue growth was affected by approximately 1-1.5% due to significant price reductions in many essential and non-food items. This move reflects the challenging market environment where the company had to lower prices, potentially impacting its profit margins.

Store Expansion

During the quarter, DMart continued its expansion strategy by adding 9 new stores, bringing the total store count to 424.

Financial Highlights

• EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) grew by 7.6% to ₹1,313.00 crore.
• EBITDA margin stood at 8.2%, compared to 8.9% in the corresponding quarter of the previous year.
• Basic Earnings Per Share (EPS) increased to ₹12.75 from ₹12.49 in the corresponding quarter of the previous year.

Consolidated Performance

On a consolidated basis, which includes the performance of its subsidiaries, Avenue Supermarts reported:

• Total revenue of ₹16,360.00 crore, a 16.3% increase from ₹14,069.00 crore in the corresponding quarter of the previous year.
• Net profit of ₹773.00 crore, remaining relatively flat compared to ₹774.00 crore in the same quarter last year.

Management Commentary

Neville Noronha, CEO & Managing Director of Avenue Supermarts Limited, stated, "Our revenue grew by 16.2% over the previous year. Two years and older DMart stores grew by 7.1% during the quarter as compared to the corresponding quarter of the previous year." He also noted that the revenue growth impact of approximately 100-150 bps was primarily due to high deflation in many staples and non-food products.

Noronha added, "Gross margins are lower as compared to the same period in the previous year, due to continued competitive intensity within the FMCG space. Operating costs are higher due to our efforts on improving service levels, capacity building and inflation at entry level wages."

Conclusion

While DMart continues to show strong revenue growth and expand its store network, the company faces challenges in maintaining profit margins due to competitive pressures and price reductions in key product categories. The management's focus on improving service levels and capacity building may help in sustaining long-term growth, but it may impact short-term profitability.

Avenue Supermarts , the parent company of D-Mart retail chain, has released its financial results for the first quarter, showing a mixed performance with revenue growth but a slight decline in profitability margins.

Q1 EBITDA Performance

The company reported a Q1 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of ₹13.00 billion, marking an increase from ₹12.00 billion in the same quarter of the previous year. This represents a year-on-year growth of approximately 8.33% in EBITDA.

Margin Pressure

Despite the growth in absolute EBITDA, Avenue Supermarts experienced a contraction in its EBITDA margin. The Q1 EBITDA margin stood at 8.25%, down from 8.90% in the corresponding period last year, indicating a decrease of 65 basis points.

Revenue and Profit Overview

According to the unaudited consolidated financial results:

The company's revenue from operations showed a robust growth of 16.3% year-on-year, rising to ₹16,359.70 crores from ₹14,069.14 crores in the same quarter of the previous fiscal year.

Profitability

Despite the strong top-line growth, Avenue Supermarts' net profit after tax remained relatively flat, with a marginal decrease of 0.1% to ₹772.81 crores compared to ₹773.68 crores in the previous year's corresponding quarter.

Management Approval

The unaudited financial results were reviewed and recommended by the Audit Committee and subsequently approved by the Board of Directors at their meeting.

Conclusion

Avenue Supermarts' Q1 results demonstrate the company's ability to drive revenue growth in a challenging retail environment. However, the decline in EBITDA margin suggests potential pressures on profitability, possibly due to increased operational costs or competitive pricing strategies. Investors and analysts will likely be watching closely to see how the company manages these margin pressures in the coming quarters while maintaining its growth trajectory.