D-Mart parent Avenue Supermarts Q2 profit rises 65.2% to Rs191 crore
Mumbai: Avenue Supermarts Limited, the parent company of retail chain D-Mart, posted a whopping 65.2% increase year on year in profit after tax for the quarter ended September 2017, the company said on Saturday.
D-Mart posted profit after tax worth Rs191 crore, up from Rs115.64 crore a year ago during the September quarter. Its revenues from operation stood at Rs3,508.26 crore, up 26.3% year on year, while gross revenue was up 31% year on year, the company said.
D-Mart’s margins benefitted from the implementation of the Goods and Services Tax, CEO and MD Neville Noronha said in an interview with Mint.
“With the GST, we saw businesses that had a higher throughput in the unorganized sector had major disruptions, as per our market intelligence,” Noronha said. “So we believe a lot of their business has come to our shores.”
This helped D-Mart improve its margin mix, allowing it to sell more of goods that earn them higher margins like apparel, footwear and general merchandise, Noronha said. Among major organized retail chains, D-Mart has one of the lowest contributions from these higher margin goods as it focuses on lower margin food, dry staples, and fruits and vegetables for a bulk of its sales.
“We are seeing relatively better traction in higher margin products,” he said.
Besides, D-Mart also saw its PAT increase because of the base effect of higher GST rates versus rate from the Value Added Tax (VAT) of the previous regime, Noronha said. This meant that net income was relatively lower as tax burden is higher under the current regime, Noronha said. However, he declined to provide the tax rates the company has been paying.
D-Mart also opened 4 new stores during this quarter outside its core market in states including Punjab, Madhya Pradesh, and Rajasthan, the company said. The company now owns 136 stores over 4.2 million square feet. Some of these were leased and not company owned, Noronha said, a departure from Avenue Supermarts’ policy of owning most of its stores’ real estate. However, he declined to specify how many stores were leased.
Shares of Avenue Supermarts, India’s most valued listed retailer, closed 2.77% lower at Rs1,234.25 per share on Friday while the benchmark BSE Sensex closed 0.78% higher at 32,432.69 points.