Avenue Supermarts Limited — Q4 FY24 earnings call

Call held 30 Jul 2024

Management summary

DMART delivered steady FY24 results with 18.4% revenue growth driven by store expansion and 9.9% like-for-like growth. GMA (general merchandise & apparel) share dipped to 22.37% from 23.04%, though apparel showed strong recovery in H2. Management firmly reiterated the value-first philosophy, maintaining 14-15% gross margins with no plans for quick commerce entry. Store expansion guided at 40-50 per year with ambitions to reach 60-70 stores annually in 2-3 years.

Highlights

  • Revenue from operations Rs.49,533 crores, up 18.4% YoY (standalone)

  • EBITDA of Rs.4,100 crores at 8.3% margin; PAT of Rs.2,695 crores at 5.4% margin

  • PAT growth of 5.4% (12% adjusted for prior year one-time tax gain)

  • Opened 41 new stores in FY24; total retail business area at 15.1 million sq ft

  • Like-for-like growth of 9.9%; 30.3 crore bill cuts in FY24

  • Revenue per sq ft at Rs.33,000, nearly back to pre-COVID FY20 levels of Rs.32,879

  • ROCE at 19.1%; zero debt; equity of Rs.19,281 crores

  • Avenue E-commerce (DMart Ready) grew 31.7% to Rs.2,900 crores with loss reducing by 240 bps

Key financials

  1. Revenue (Standalone) ₹49,533 Cr +18.4%YoY
  2. EBITDA ₹4,100 Cr
  3. EBITDA Margin 8.3%
  4. PAT (Standalone) ₹2,695 Cr +5.4%YoY
  5. PAT Margin 5.4%
  6. Revenue (Consolidated) ₹50,789 Cr +18.6%YoY
  7. Like-for-Like Growth 9.9%
  8. ROCE 19.1%
  9. Revenue per Sq Ft ₹33,000
  10. Net Cash from Operations ₹3,343 Cr

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

  • DMart Stores
    41 stores Store Count (New)15.1 million sq ft Total Area
  • Avenue E-commerce (DMart Ready)
    ₹2,900 Cr Revenue31.7% Growth₹-185 Cr Loss
  • Align Retail Trade (Packaging)
    ₹2,800 Cr Revenue₹33 Cr PAT

Guidance & targets

Expansion

  • Annual Store Additions Expansion · FY25-FY28 · Medium confidence 40-50 stores per year; 60-70 in 2-3 years
    We are primed and ready in terms of opening around 40-50 stores... in another two to three years, this 40 should go to a 60 or a 70 per year

    — Neville Noronha

Margins

  • Gross Margin Margins · Ongoing · High confidence 14-15%
    14%-15% gross margin, we're going to play around that. Anything beyond that, we want to pass it on to the customer

    — Neville Noronha

Product Mix

  • GMA Contribution Product Mix · Ongoing · High confidence ~23% (will not return to 27-28%)

    From 23.04% FY23 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

  • Quick commerce competition in metro cities

    medium

    Management acknowledges 50-100 bps SSSG impact on high-throughput metro stores. Solution is cannibalizing own stores by opening more in clusters rather than ceding to competition.

    Analyst acknowledged

  • GMA contribution secular decline

    medium

    GMA share fell from 23.04% to 22.37%. Management says this is a secular 20-year trend as stores mature and food/grocery intensity increases. Will not return to 27-28%.

    Management acknowledged

  • Gross margin compression from food mix shift

    medium

    Gross margin declined 37 bps YoY as food (lower margin) contribution increased due to agri inflation. Management maintains 14-15% gross margin target.

    Analyst acknowledged

  • DMart Ready e-commerce losses continue

    low

    DMart Ready still loss-making at Rs.185 crores loss on Rs.2,900 crores revenue. Management deliberately keeping growth slow to fix model first.

    Analyst acknowledged

Areas of evasion (1)

  • Specific capex numbers not disclosed

Q&A highlights

3 direct
Quick commerce impact on DMart stores Direct
there could be a 1% to 2% SSSG CAGR impact... But is any of my store declining, negative? Do I see very large red flags? Absolutely not

Management acknowledges minor 50-100 bps impact from quick commerce on high-throughput metro stores but firmly rules out entering quick commerce

Asked by Arnab Mitra (Goldman Sachs)

Gross margin philosophy and private labels Direct
we are more a top line-driven company and we believe that if we continue to remain relevant to the customer from a value standpoint then margins, ROI, all of that will follow

Management commits to passing on scale benefits to consumers rather than margin expansion; private labels a very long-term play due to India's low per capita income

Asked by Latika Chopra (JPMorgan)

Store expansion acceleration plans Direct
typically 10% to 15% of my number count should be my new store opening... if I have 400 stores then I should be opening 60 stores

Clear framework for store addition velocity scaling with base; 60-70 stores/year target in 2-3 years represents meaningful acceleration

Asked by Arnab Mitra (Goldman Sachs)

1 min read 4 chapters

Detailed narrative

Value-First Philosophy Reinforced Amid Competition

Management firmly reiterated DMart's core positioning as a value retailer with 14-15% gross margins, explicitly choosing to pass on scale benefits to consumers. Neville Noronha made it clear DMart will not enter quick commerce and sees only marginal 50-100 bps SSSG impact from it on metro stores. The solution is cluster-based cannibalization - opening more stores rather than ceding ground.

Apparel Recovery and GMA Mix Stabilization

After significant challenges in the apparel category, management reported strong recovery with apparel being the highest-growing category in recent quarters. Leadership and team changes are 70-80% complete. However, GMA contribution is guided to stabilize around 23%, down from historical 27-28%, as a secular trend of maturing stores shifting toward food and grocery intensity.

Store Expansion Acceleration Roadmap

DMart opened 41 stores in FY24 adding 1.8 million sq ft. Management articulated a clear framework: 10-15% of store count as annual additions. Current target is 40-50 stores/year, scaling to 60-70 in 2-3 years. Revenue per sq ft recovered to Rs.33,000, nearly matching pre-COVID levels of Rs.32,879, indicating healthy unit economics for expansion.

E-commerce Strategy: Deliberate and Conservative

DMart Ready grew 31.7% to Rs.2,900 crores but losses of Rs.185 crores continue (improved 240 bps YoY). Management is deliberately slowing growth to fix the model, adding just one new city in FY24. Focus is on increasing throughput in large cities (Mumbai, Ahmedabad, Delhi) where the DMart Ready model has natural convergence with customer needs. No plans to match quick commerce players' pace.

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