Avenue Supermarkets Q4 Results: Profit Beats Estimates; Flags 'Significant' Disruptions In Q1
Avenue Supermarkets net profit, revenue beat estimates
Avenue Supermarts Ltd.’s profit surpassed estimates in the March quarter even as the company said Covid-linked restrictions severely impacted revenue in the ongoing quarter.
Net profit of the operator of the DMart chain of hypermarkets fell 8% quarter-on-quarter to Rs 434.9 crore in the January to March period, according to its exchange filing. That compares with the Rs 371.6-crore consensus estimate of analysts tracked by Bloomberg.
Revenue fell 2% sequentially to Rs 7,303.1 crore compared with the Rs 7,238-crore estimate.
Operating profit fell 11% to Rs 616.6 crore.
Operating margin stood at 8.4% compared with 9.3% in the October-December period.
Over 80% Stores Hit By Covid Restrictions
Avenue Supermarts said that since March, operations in more than 80% of its stores have been hit due to restrictions imposed to counter the brutal second wave of the pandemic. These shutdowns are having an "adverse and severe impact" on revenue, it added.
“A much stronger second wave of Covid-19 infections hit the country towards the end of FY2021 and has once again resulted in significant disruption to our business as several cities and towns have announced restrictions,” Avenue Supermarts Chief Executive Officer and Managing Director, Neville Noronha, was quoted as saying in the filing.
He added that the company expects more frequent lockdowns across cities and towns and the trend is likely to continue until a large part of the population is vaccinated and new infections reduce significantly and remain like that for a long period.
Excess Inventory
The company said it's continuing to receive regular supply of goods from its suppliers, but the problem of excess inventory is a "larger issue" than in the first wave.
The receding threat of the pandemic and consequent sales surge in the December quarter and most of the March quarter, followed by the oncoming summer and back to school season made the company plan more optimistically.Avenue Supermarts Statement
This could have a longer-term impact on its inventory to sales ratio as it could take time to liquidate the excess inventory, the company added.
Store Addition Plans Hit
Due to restrictions on construction activity since March, "we would be unable to forecast the impact of the current lockdowns on our store opening pipeline for this year,” CEO Noronha said. “However, we remain optimistic here as migration of construction workers is not visible like the first time.”
FY21 Business Highlights
Sales mix has shifted towards grocery and fast-moving consumer goods. Sales from general merchandise and apparel fell to 22.9% of DMart's total revenue for the year-ended March as compared with 27.3% in the previous year.
“This is a result of consumer preference of need-based/essential goods shopping for a significant period during the year, reduced discretionary spending and significant restrictions on selling non-essentials during the early part of the year,” Noronha said.
The company continued the expansion of its e-commerce business and increased its presence across the Mumbai Metropolitan Region and commenced servicing four new cities - Ahmedabad, Pune, Bangalore, and Hyderabad.