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    Avenue Super.

    DMARTGood
    Consumer Services·26 Jul 2023
    Management Summary

    DMart delivered strong FY23 recovery with revenue of ₹41,800 Crore and 8.7% EBITDA margin as post-COVID normalization continued. Like-for-like growth was 11% on a comparable H2 basis. GMA contribution declined but management viewed it as structural rather than concerning. Key positive was significantly increased confidence in DMart Ready economics - '90% of anxiety gone' about potential losses. Inventory efficiency improved dramatically to 28.8 days from 36.5.

    Highlights

    8

    • FY23 standalone revenue ₹41,800 Crore; EBITDA margin 8.7%; PAT margin 6.1%; net cash flows ₹3,113 Crore

    • Opened 40 stores in FY23; added 1.9 million sq ft; revenue per sq ft ₹31,000 (lower due to larger stores)

    • Like-for-like growth 24.2% for 2-year period; 11% for H2 on more comparable basis

    • Bill cuts grew from 18.1 Crore to 25.8 Crore

    • GMA contribution declined significantly, impacting gross margins; food & non-food FMCG stable

    • Inventory days improved from 36.5 to 28.8 days; return ratios trending back to pre-COVID levels

    • DMart Ready: 90% of anxiety about losses gone; confident e-commerce can't lose too much money

    • Added 10 new cities for DMart Ready; started pharmacy business as brick-and-mortar complement

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue from Operations (Standalone)₹41,800 Cr
    2. 02EBITDA Margin8.7%
    3. 03PAT Margin6.1%
    4. 04Net Cash from Operations₹3,113 Cr
    5. 05Bill Cuts₹25.8 Cr

    Segment breakdown

    DMart Stores (Standalone)
    ₹41,800 Cr Revenue
    Avenue E-Commerce (DMart Ready)
    24 number Cities
    List

    Guidance & targets

    2
    CategoryTargetPriority
    Store Expansion
    Store opening run rate
    Maintain past run rate (~40 stores/year)
    		Medium
    E-Commerce
    DMart Ready profitability outlook
    Cannot lose too much money; margin TBD in 2-3 years
    		Medium

    Risks & concerns

    5
    RiskSeverity

    GMA contribution structural decline impacting gross margins

    GMA contribution declined significantly from pre-COVID levels. Higher food/FMCG mix has lower margins. Management accepted this as new normal. — Both acknowledged

    medium

    Revenue per sq ft below pre-COVID due to larger stores

    ₹31,000 per sq ft vs pre-COVID ₹32,879 attributed to larger store sizes. Management focuses on ROI per store rather than revenue per sq ft. — Management downplayed

    low

    Areas of Evasion(3)

    • Specific store opening numbers
    • E-commerce profitability timeline
    • Private label details

    Q&A highlights

    3

    “general merchandise and apparel contribution has been lower than the past trends... consequently, that is why our gross margins have reduced in the recent past”

    GMA decline from ~27% to ~23% is structural not cyclical, with direct gross margin impact; management not attempting to reverse it

    1 min read4 chapters

    Detailed Narrative

    01

    Strong Post-COVID Recovery Continues

    FY23 revenue reached ₹41,800 Crore with 8.7% EBITDA margin. Bill cuts grew from 18.1 to 25.8 Crore. Return ratios trending back to pre-COVID levels. Inventory efficiency dramatically improved to 28.8 days from 36.5 days, partly due to lower GMA inventory mix.

    02

    GMA Structural Decline Accepted as New Normal

    General Merchandise & Apparel contribution declined significantly with direct gross margin impact. Management accepted this as structural rather than cyclical, driven by specialist competition in apparel and format's natural evolution toward food-heavy mix as stores mature. Higher food FMCG mix compensates through volume and footfall.

    03

    DMart Ready Confidence Transformation

    Management tone on e-commerce shifted dramatically with '90% of anxiety gone'. Added 10 cities in pilot format. Key insight: grocery e-commerce 'cannot lose too much money' unlike marketplaces. Cost will be higher than brick-and-mortar but manageable. 2-3 year visibility expected on margin side. Also started complementary pharmacy business.

    04

    Steady Store Expansion With Model Discipline

    Opened 40 stores adding 1.9 million sq ft. Revenue per sq ft at ₹31,000 (lower due to larger stores, not performance). Real estate strategy unchanged - cluster-based, own rather than lease. Management focused on ROI per store rather than vanity metrics like revenue per sq ft.

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