Avenue Supermarts Limited — Q1 FY25 earnings call

Call held 30 Jul 2024

Management summary

DMart delivered solid FY24 with 18.4% revenue growth, opening 41 stores. Like-for-like growth was strong at 9.9%. Gross margin declined 37bps due to competitive FMCG pricing and GM&A mix shift. E-commerce grew 31.7% with losses at ₹185 Crore in a year of consolidation. Management maintained disciplined approach to expansion, guiding 40-50 stores annually with aspiration for more as store base grows.

Highlights

  • FY24 standalone revenue ₹49,533 Crore with 18.4% growth; EBITDA margin 8.3% (~₹4,100 Crore); PAT ₹2,695 Crore at 5.4% margin

  • Opened 41 stores in FY24; total retail business area 15.1 million sq ft with 1.8 million sq ft added

  • Like-for-like growth 9.9% for 24M+ stores; 30.3 Crore bill cuts; revenue per sq ft ₹33,000

  • Avenue E-Commerce (DMart Ready) grew 31.7% but loss at ₹185 Crore; now in 24 cities

  • Consolidated revenue ₹50,789 Crore; PAT ₹2,536 Crore (13.5% growth excl. prior year tax gain)

  • ROCE 19.1%; RONW 15.1%; fixed asset turnover 3.6x; inventory turnover 14.6x

  • GMA (General Merchandise & Apparel) contribution declined from 23.04% to 22.37%

  • Store expansion target: 40-50 stores per year; aspiration to open 10-15% of base annually

Key financials

  1. Revenue from Operations (Standalone) ₹49,533 Cr +18.4%YoY
  2. EBITDA Margin (Standalone) 8.3%
  3. PAT (Standalone) ₹2,695 Cr +5.4%YoY
  4. Revenue (Consolidated) ₹50,789 Cr +18.6%YoY
  5. PAT (Consolidated) ₹2,536 Cr +13.5%YoY
  6. Revenue per sq ft 33,000 Rs per sq ft
  7. Bill Cuts ₹30.3 Cr
  8. Like-for-Like Growth (24M+ stores) 9.9%
  9. ROCE 19.1%
  10. RONW 15.1%

What they filed

Q1 FY27: revenue up 15.1%, net profit up 12.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue14,050 15,565 14,462 15,932 16,219 +15%17,613 +13%17,204 +19%18,343 +15%
EBITDA1,105 1,235 981 1,313 1,230 +11%1,481 +20%1,231 +25%1,527 +16%
Net profit710 785 620 830 747 +5%923 +18%725 +17%936 +13%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Standalone (DMart Stores)
    ₹49,533 Cr Revenue₹4,100 Cr EBITDA
  • Avenue E-Commerce (DMart Ready)
    31.7% Sales Growth₹-185 Cr Loss
  • Align Retail (Packaging)
    ₹2,800 Cr Sales₹33 Cr PAT

Guidance & targets

Store Expansion

  • Annual store openings Store Expansion · FY25 · High confidence 40-50 stores
    ready in terms of opening around 40-50 stores

    — Neville Noronha

  • Long-term store opening rate Store Expansion · Long-term · Medium confidence 10-15% of base annually
    if I have 400 stores then I should be opening 60 stores. If I have 800 stores, then say 15% of 800 stores

    — Neville Noronha

Category Mix

  • GMA contribution Category Mix · Ongoing · High confidence ~23% (stabilized)

    From 27-28% today

    we are not going to be 28% or 27% like it used to be earlier. A broad trend line will be around the current run rates of around 23%

    — Neville Noronha

Risks & concerns

  • GMA contribution secular decline

    medium

    GMA declined from 23.04% to 22.37% and will not return to pre-COVID 27-28% levels. Stabilizing around 23%. Higher-margin apparel under pressure from specialist competitors.

    Analyst acknowledged

  • Quick commerce emerging as competitive threat

    medium

    Management attributes metro challenges to internal execution rather than QC. Believes physical store experience + value positioning is sustainable moat.

    Analyst downplayed

  • Gross margin compression from FMCG competitive pricing

    medium

    37bps gross margin reduction driven by FMCG price competition and category mix shift toward lower-margin food categories.

    Management acknowledged

  • DMart Ready losses continuing

    medium

    E-commerce arm lost ₹185 Crore in FY24 despite 31.7% growth. Year of consolidation focused on model refinement over growth.

    Analyst acknowledged

Areas of evasion (3)

  • Private label details not shared
  • DMart Ready profitability timeline unclear
  • Forward store numbers not committed

Q&A highlights

3 direct
Quick commerce impact on metro stores Direct
what impacts our metro revenues, it's actually our own ability to operate the store... not really because of the competition

Management attributes metro store performance issues to internal execution (staffing, management quality) rather than QC competition

E-commerce consolidation strategy Direct
this year would be a year of consolidation... it's a conscious decision to fix the model, make it right and bring in high throughputs in the existing cities

Deliberate choice to slow DMart Ready expansion for model refinement rather than growth at any cost

Store expansion philosophy and real estate strategy Direct
the principle is more of the same - try and open as many stores in existing markets... if there's an opportunity to deploy capital in existing markets, it's a better option

Cluster-based expansion continues with existing markets prioritized; new states approached cautiously

1 min read 4 chapters

Detailed narrative

Solid FY24 Revenue Growth with Margin Moderation

DMart standalone revenue grew 18.4% to ₹49,533 Crore with EBITDA margin of 8.3%. Gross margin declined 37bps from competitive FMCG pricing and mix shift toward lower-margin food categories. PAT of ₹2,695 Crore grew 5.4% (12% excluding prior year tax gain). Revenue per sq ft at ₹33,000, back to FY20 pre-COVID levels.

Store Expansion Steady at 41 with 40-50 Per Year Guidance

Opened 41 stores in FY24 adding 1.8 million sq ft. Guided 40-50 stores for FY25. Long-term aspiration is 10-15% of store base annually. Cluster-based expansion prioritizing existing markets. GMA contribution stabilizing around 23%, down from pre-COVID 27-28%.

DMart Ready in Consolidation Mode

E-commerce grew 31.7% but this was a deliberate 'year of consolidation' with only one new city added (now 24 cities). Losses at ₹185 Crore. Management focused on fixing model, improving throughputs, and transitioning from pickup to home delivery model.

Return Ratios Strong but Moderating

ROCE at 19.1% and RONW at 15.1%, marginally lower than FY23. Fixed asset turnover at 3.6x close to pre-COVID levels. Inventory at 29 days and payables at 7.1 days. Balance sheet remains debt-free (excluding Ind AS 116 lease liabilities). Equity base ₹19,281 Crore.

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