DMart retail chain slumps nearly by 5% on profit miss, margin drop

(Reuters) – Shares of Avenue Super Marts Ltd., which operates the DMart retail chain, fell 4.7% Monday after the company’s fourth-quarter profit missed estimates and core profit margin shrank as consumers curbed discretionary spending.

DMart, which faces stiff competition from Reliance Industries Ltd and is known for discounts on everything from pulses to clothing, has seen inflation-battered consumers tighten spending on non-essential purchases.

Shares of the company have fallen the most in more than a month and are down 9.6% so far this year, as of the last close.

The retailer said in a regulatory filing on Saturday that its earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to 7.3% in the quarter from 8.4% in the year-ago period.

“Depressed consumer spending in general merchandise and apparel persisted and impacted margin mix downward,” CEO Neville Noronha said in a statement.

DMart’s general goods and apparel segment, which sells products including toys, crockery and apparel, accounts for about 23% of the company’s revenue.

Analysts said stubborn inflation delayed a full recovery in this category from the coronavirus-induced slowdown.

DMart’s profit rose nearly 8% to 4.60 billion rupees year-on-year, but missed analyst estimates of 5.21 billion rupees, according to Refinitiv IBES data, as expenses rose 22% to 100.02 billion rupees.

India’s retail market is mostly dominated by unorganized stores, but organized retail is gaining market share and e-commerce is accelerating.

Bernstein estimates that Reliance Retail, the retail arm of Reliance, expanded its market share from 1.8% in fiscal 2018 to about 2.5%-3% in fiscal 2023, which is 2.5 times the combined size of DMart, Titan, Aditya Birla Fashion and selling by pieces.

DMart’s revenue grew by 20.6% to Rs.105.94 crore in the reported quarter.

(Reporting by Elif Jahan in Bengaluru; Editing by Sherry Jacob-Phillips)