Avenue Supermarts Ltd, which operates the popular grocery chain DMart, saw its shares plunge over 9% on Monday, October 14, 2024, following disappointing earnings for the second quarter. The stock dropped to a low of ₹4,143.60 on the Bombay Stock Exchange (BSE) and ₹4,139.95 on the National Stock Exchange (NSE). This decline reflects growing concerns among investors after the company reported financial results that fell short of market expectations.
Main Points
Financial Performance Overview
In its latest earnings report, DMart announced a consolidated net profit of ₹659.44 crore for the quarter ending September 2024, marking a year-on-year increase of 5.8%. However, this figure was significantly below analysts’ estimates of around ₹812 crore. The company’s revenue from operations rose by 14.4%, reaching ₹14,444.50 crore compared to ₹12,624.37 crore in the same quarter last year. Despite this growth in revenue, it was not enough to satisfy investors who anticipated stronger performance.
The company’s expenses also surged during this period, climbing by nearly 15% to ₹13,574.83 crore. This increase in costs has raised concerns about DMart’s profitability and operational efficiency moving forward.
The disappointing earnings led several brokerage firms to downgrade their ratings on DMart’s stock. Notable changes included:
- JPMorgan: Downgraded from Overweight to Neutral with a target price cut from ₹5,400 to ₹4,700.
- Morgan Stanley: Downgraded from Overweight to Underweight with a significant target price reduction from ₹5,769 to ₹3,702.
- Nuvama: Maintained a Hold rating but lowered its target price from ₹5,183 to ₹5,040.
Analysts pointed out that DMart is facing increasing competition from online grocery platforms and quick commerce services that offer faster delivery options. This shift in consumer behavior is particularly impacting DMart’s sales in metro areas.
The rise of quick commerce platforms such as Blinkit has intensified competition for DMart. These platforms are capturing market share by providing rapid delivery services that appeal to urban consumers seeking convenience. As a result, DMart’s like-for-like sales growth fell to just 5.5%, down from 9.1% in the previous quarter.
Moreover, footfalls at DMart stores have declined by 1% quarter-on-quarter, contrasting sharply with a 4% increase during the same period last year. This trend indicates that consumers are increasingly opting for online shopping over traditional retail experiences.
For investors holding DMart shares or considering new investments, the current situation presents both challenges and opportunities. Analysts suggest that while DMart continues to grow, it must adapt quickly to the changing retail landscape dominated by online competitors.
Investors are advised to monitor how effectively DMart can enhance its digital grocery platform, DMart Ready, and manage its operational costs amid rising competition. The company’s ability to maintain its market position will be crucial in the upcoming quarters.
Disclaimer: The information given in this article is from investment experts and brokerage companies, they do not represent Local Haryana. Before taking any investment related decision, you must consult a certified expert.
