Overview of Avenue Supermarts’ Q3 Update
Avenue Supermarts Ltd., the parent company of DMart, witnessed its stock price jump 10% on January 3, 2025, following the release of its business update for the October-December quarter (Q3 FY25). The retailer showcased strong standalone revenue growth, driven by consistent store expansion and steady same-store sales growth (SSSG).
At 9:20 AM, DMart’s stock was trading at Rs 3,972.2 on the NSE, reflecting a sharp upward trend fueled by investor confidence in the company’s performance during the quarter.
Key Financial Highlights for Q3 FY25
The company reported standalone revenue from operations of Rs 15,565.23 crore, marking a robust 17.5% year-on-year (YoY) growth compared to Rs 13,247 crore in the same period last year.
Key Figures:
- YoY Revenue Growth: 17.5%
- Net Profit (Q2 FY25): Rs 659.6 crore, up 5.8% YoY
- Store Count (as of December 31, 2024): 387
The positive revenue trajectory aligns with DMart’s strategic emphasis on expanding its footprint and diversifying its product offerings through private labels.
Store Expansion and Strategic Focus
DMart added 10 new stores during the quarter, maintaining its aggressive expansion strategy. With a total of 387 stores as of December 2024, the retailer’s growth was significantly driven by its increased store count, contributing to a 12% average growth in operational outlets.
Same-Store Sales Growth (SSSG):
The implied SSSG for the quarter stood at 5.5%, slightly above the market estimate of 4%. This growth reflects the company’s ability to retain and attract customers despite increasing competition in the retail space.
Private Labels Strategy:
DMart’s focus on private labels—products exclusively sold under the DMart brand—has gained traction, enabling the retailer to counter competition from quick commerce players. The strategy positions DMart as a cost-effective option for customers while driving higher margins.
Brokerages Offer Divergent Opinions
Bearish Views:
- Morgan Stanley
- Maintained a cautious outlook, stating that DMart’s revenue growth, while robust, remains below its historical average of 20%.
- Highlighted challenges posed by competitive pressures and slower gross margin improvements.
- Target Price: Rs 3,702, indicating a modest 4% upside.
- Macquarie
- Expressed concerns over the competitive headwinds from quick commerce players.
- Observed that while the company’s 10-store additions were in line with expectations, growth momentum remains subdued compared to prior years.
Bullish Views:
- CLSA
- Maintained an outperform rating with a target price of Rs 5,360, implying a 50% upside.
- Expressed optimism regarding DMart’s pivot to private labels, which positions the company competitively.
- Highlighted that standalone revenues exceeded expectations, bolstering confidence in the retailer’s strategy.
Market Sentiment and Competitive Landscape
The mixed reactions from brokerages underline the challenges Avenue Supermarts faces in a highly competitive retail environment. Quick commerce platforms and e-commerce giants continue to disrupt traditional retail models, but DMart’s focus on value pricing, store expansion, and private labels offers a strong counter-strategy.
While growth in revenue and SSSG has been steady, it falls short of historical benchmarks, leading to cautious sentiments among certain market observers. However, bullish brokerage views underscore the long-term potential of DMart’s strategic initiatives.
Future Outlook for Avenue Supermarts
Looking ahead, Avenue Supermarts’ ability to sustain its growth trajectory will depend on several factors:
- Competitive Strategy: Continued emphasis on private labels and store expansion to counter quick commerce competition.
- Margin Improvements: Enhancing gross margins through better product mixes and operational efficiencies.
- Market Trends: Leveraging seasonal demand and consumer preferences to drive SSSG and overall revenue growth.
Conclusion
Avenue Supermarts has demonstrated resilience with a strong Q3 FY25 performance, achieving 17.5% YoY revenue growth and expanding its store count to 387. While brokerages remain divided on the company’s short-term prospects, DMart’s strategic focus on private labels and cost leadership positions it for sustained long-term growth.
Investors should consider the mixed brokerage opinions and monitor DMart’s quarterly performance to make informed decisions. As competition intensifies, DMart’s agility and innovation will play a crucial role in maintaining its market position.
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