Avenue Supermarts slumps 5% after company reports decline in April sales2 min read . Updated: 26 May 2020, 03:39 PM IST
- In the past one year, shares of Avenue Supermarts have rallied 76.4%, in contrast to the 22.7% decline in S&P BSE Sensex
- The company’s market cap is now higher than that State Bank of India, Larsen & Toubro, and Maruti Suzuki India
M UMBAI: Shares of Avenue Supermarts fell 5% on Tuesday as investors were concerned after the company reported a 45% decline in its April sales because of the nationwide lockdown to contain the spread of covid-19.
At 0240 pm, the stock traded at ₹2,282.45 apiece, down 5% from its previous close, while the benchmark Sensex was down 0.2% at 30,606.15. Despite today's fall, the stock is close to its all-time high of ₹2,559 touched on February 13, 2020.
In the past one year, shares of Avenue Supermarts have rallied 76.4%, in contrast to the 22.7% decline in S&P BSE Sensex.
With a market cap of ₹1.56 trillion on the BSE, retail chain operator Avenue Supermarts is at the 12th spot in the overall market-cap ranking. The company’s market cap is now higher State Bank of India, Larsen & Toubro, and Maruti Suzuki India Limited.
Avenue Supermarts owns and operates D-Mart stores - a national supermarket chain. The company offers a wide range of products with a focus on foods, non-foods, and general merchandise and apparel product categories.
The company's revenue rose 11% year-on-year in March as lockdowns and curbs kicked in at the fag end of the month. The trend rapidly deteriorated in April during which more than half of its stores had to be shut or were allowed operations for restricted hours.
"Our revenue for April was down by more than 45% as compared to April 2019. Our margins have also seen erosion as regulations did not permit us to sell any apparel and general merchandise products," the company said in a release.
"Significantly large EBITDA declines are to be expected due to lower sales, lower gross margins, higher cost of operations on account of hardship allowance to front line staff during lockdown and higher personal hygiene/store sanitation costs," it added.
Analysts at Motilal Oswal have cut Ebitda estimate by 16.8% for FY21 due to 50% of stores being closed during April–May, lower gross margins from increased non-discretionary revenue, and higher opex.
"Retail companies are expected to see revenue erosion. While Q1 could be a washout, DMart could see recovery sooner than other retailers as non-discretionary revenue contributes 72% to the total revenue," it added. The brokerage has a sell rating on the stock.
Analysts at Edelweiss Research believe that Avenue Supermarts’ (DMart) reported March revenue/EBITDA/net profit was up 23.6%/12.1%/41.6% YoY respectively on the back of strong store expansion in the March quarter, steady same store sales growth of 10.9% for FY20 and profit benefitting from a lower effective tax rate.
"April-June quarter started on a challenging note and expect lower than 15% revenue growth in FY2021 estimates. Comparable EBITDA margin dipped 120 bps YoY in the wake of adverse mix and the challenging environment but are positive on DMart’s long-term growth strategy, lean cost structure, and strong balance sheet. Huge opportunity available in the pie for handful of organized players, and are not worried about DMart’s prospects with the launch of Jiomart," Edelweiss Research said. The brokerage has a hold rating on the stock.
After the easing of certain lockdown curbs, May has seen some improvement. The company was able to open and operate more stores, and the relaxations helped the first 14 days' of the mon this revenue rise 17% sequentially.
Supply chain has also seen significant improvement as manufacturers resumed operations and the transport of goods was allowed by local authorities.