InvestorQ : What should I do with my Avenue Supermarts stock after the recent fall in price?
Debbie Mascarenhas made post

What should I do with my Avenue Supermarts stock after the recent fall in price?

Crowny Pinto answered.
1 year ago

Avenue Supermarts, the owner of the D-Mart brand, reported a sharp 87.61% fall in net profits at Rs.40 crore for the Jun-20 quarter. This is a sharp fall from the Rs.323 crore reported in Jun-19 quarter but that is understandable considering that the economy was in the midst of a lockdown in the June quarter.

Even D-Mart’s total revenues fell 33.22% to Rs.3883 crore in the Jun-20 quarter, again driven by lower visibility on sales due to the lockdown. Even the profit margin for D-Mart fell sharply from a healthy 5.5% last year to just 1% in the June quarter. The actual and the lag effect of COVID-19 and the ensuing restrictions had a significant impact on D-Mart.

The good news is that the stores were largely allowed to operate unhindered and they saw a recovery to touch 80% of pre-COVID sales levels in July. Hence the September quarter is expected to be relatively better for D-Mart. However, the company observed that in the non-FMCG categories, the discretionary consumption remained under pressure.

The challenge for D-Mart is that store operations and the duration were still inconsistent across cities. The government is still again insisting that retailers only sell essential products. The social distancing was also taking its toll on the sales and profit numbers and entailing a higher cost. Unlike in the West, organized has not really benefited post COVID. D-Mart stock could come under pressure if the uncertainty prevailed for more time.