ICICI Direct: Avenue Supermarts’ Resilient Business Model To Weather New Challenges   

ICICI Direct Report

We attended the annual conference call on Avenue Supermarts (DMart) to get an insight into the outlook and challenges lying ahead owing to the Covid-19 pandemic.

Majority of the questions (as anticipated) were pertaining to future plans regarding its e-commerce play ‘DMart Ready’ and views on intensified competition from new entrants with deep pockets.

The management reiterated its stance of not aggressively foraying into ecommerce play and rather focusing on further consolidating its position to be an eminent player in the brick and mortar format.

Over the years, DMart, through its proven business model, has been able to maintain consistent profitability and remains an exceptional performer in its peer group. Currently, approximately 95% of stores are operational, with stores seeing 80% of pre Covid-19 sales.

On the store opening front, the company has reasonable inventory of store acquisitions. However, store openings can be muted in FY21E due to a delay in construction owing to limited construction activity (since it takes two to three years to set up a store).

The company plans to make up for the same by opening higher stores in FY22E. We bake in approximately 51 stores in FY21-22E

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