ExplainedWhy DMart shares dropped over 3% in early trade

By India Today Business DeskShares of Avenue Supermarts Ltd, which operates the DMart retail chain, fell over 3 per cent in early trade on Monday after the company missed Q4 profit estimates.

The company’s shares were trading 3.03 per cent lower at Rs 3,566.20 apiece after DMart’s parent reported its quarterly results for the quarter ended March 2023 on Saturday.

Not only did the company miss its profit estimates in Q4, but its core profit margin also contracted.

Its earnings before interest, taxes, depreciation and amortization (EBITDA) margin fell to 7.3 per cent in the quarter, compared to 8.4 per cent in the year-ago period.

While DMart’s profit rose 8 per cent year-on-year to Rs 460 crore, it was short of the Rs 521 crore figure, which was estimated by analysts. It may be noted that Avenue Supermarts reported a standalone net profit of Rs 505.21 crore in the quarter.

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Meanwhile, the Radhakishan Damani-owned company reported a revenue of Rs 10,337 crore in the quarter, which is a 21.11 per cent jump over Rs 8,606.09 crore in the corresponding quarter a year ago.

Avenue Supermarts CEO and MD Neville Noronha cited lower consumer spending in general merchandise and apparel as the reason behind the weaker growth. He said it impacted the margin mix downwards.

Brokerage firm Morgan Stanley highlighted that lower demand for better margin apparel and general merchandise categories remains a challenge for the company. It has a target price of Rs 3,853 per share with an equal weight rating on the stock.