Monday’s opening session saw a nearly 9% decline in shares of Avenue Supermarts, the company that owns and runs D-Mart stores, following the chain’s disappointing September quarter earnings release. In July-September, the company run by Radhakishan Damani saw a slow growth rate due to a decrease in store productivity and a rapid expansion of quick commerce services in major cities.
Avenue Supermarts’ stock began Monday’s trading session lower for the third straight day at ₹4,247.95, a 7% decrease from the previous closing price of ₹4,572.35 on the BSE. The DMart retail chain operator’s shares fell 9.4% to ₹4,143.60, extending its initial losses, and its market capitalization dropped to ₹2.77 lakh crore.
DMart Q2 Results
The company that operates DMart stores, Avenue Supermarts, recorded an 8% increase in its September quarter standalone net profit year over year to Rs 710.37 crore from Rs 658.54 crore in the same period the previous year. Operational revenue was Rs 14,050.32 crore, up 14% from the Rs 12,307.72 crore the company recorded a year earlier.
Goldman Sachs Recommendation
According to the reports, Goldman Sachs has recommended selling DMart, with a target price of Rs 4,000 per share. The brokerage emphasized that Avenue Supermarts will probably continue to be impacted by the quick commerce industry’s rapid rise in the future.
Morgan Stanley Recommendation
Reportedly, Avenue Supermarts was downgraded to ‘Underweight’ by Morgan Stanley, with a decreased target price of Rs 3,702 per share. Morgan Stanley analysts pointed out that further de-rating may occur if management’s remarks raise doubts about the company’s capacity to realize its targeted 20% top-line growth.
Conclusion
This downgrading comes after fast commerce and other online grocery platforms negatively impacted metro city sales, leading to poor retail data. In Q2, same-store sales growth (SSG) decreased from 9.5% in Q1 to 5.5% in Q2. With 1.2% year-over-year growth in sales per store, 1.6% year-over-year growth in bills per store each day, and only a 0.5% increase in sales per square foot, other growth metrics were likewise modest. Additionally, when DMart established six additional stores in Q2 FY25, retail costs climbed by 65 basis points.
