COVID-19 impact: DMart sees steep decline in revenue, profits

DMart said lockdown rules continue to be strict in certain cities and local municipalities, which has a significant negative impact on footfalls and sales.
 COVID-19 impact: DMart sees steep decline in revenue, profits
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DMart, the chain of supermarkets under Radhakishan Damani’s Avenue Supermarts saw its Profit after Tax (PAT) decline by a whopping 85.2% to Rs 50 crore for the first quarter of FY21, with discretionary spending among consumers reducing significantly. The company's shares saw its biggest single-day drop in more than a year of 6.1%, but it soon recovered.

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Avenue Supermarts said it recovered 80% of business in stores where it has been allowed to operate. However, 30% of DMart’s business comes from Mumbai, which has seen a large number of COVID-19 cases. DMart operates in Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.

Avenue Supermarts saw a 33.7% decline in revenue year-on-year with the total revenue of Rs 3,833 cr. EBITDA saw y-o-y decline of 81.7% at Rs 109 crore. It also saw its earnings per share fall by 86% in Q1 of FY21.

It reported an 87.59% decline in consolidated net profit at Rs 40.08 crore for Q1. 

“Discretionary consumption continues to be under pressure, especially in the non-FMCG categories. This is impacting gross margins negatively. Store operations and duration of operation per day continues to remain inconsistent across cities due to strict lockdowns enforced by local authorities from time to time. In addition, in certain cities authorities are once again insisting on selling only essential products,” it said in a statement.

Due to this, the company added, future revenues continue to be uncertain. 

For reportedly the first time, the company also spoke about its online sales, and said sales through DMart Ready, its app, have grown very well in Mumbai. “We are making all attempts to scale it up in a meaningful manner. We started Home Deliveries (using DMart Ready App) through our stores across the rest of the cities but discontinued it once the stringent lockdowns were withdrawn and our stores were allowed to open for business,” it said. 

Neville Noronha, the CEO and Managing Director, said: “Covid-19 continued to spread across the country. The ensuing restrictions have had a significant impact on our operational and financial performance in the quarter. Our revenue, EBIDTA and PAT for the quarter were significantly lower as compared to the same quarter last year.”

DMart said that unlike developed countries where organised retailers saw more walk-ins, it did not happen the same way in its stores. 

“This was because of the strong enforcement of store shutdowns, restrictive movement of people in general and strict social distancing rules inside stores. While the overall lockdown rules have softened in general, they continue with the same or more severe intensity in certain cities and local municipalities from time to time. Its negative impact on footfalls and sales were significant,” DMart said. 

It added that the kirana stores came “roaring back” after two to three weeks of lockdown and quickly served customer needs. “Value wasn’t top of mind for shoppers during this time,” it said. 

Motilal Oswal Securities said in a note that July business could also be affected, with around 20% of DMart’s July stores shut. “The non-grocery category is operating at double-digit like-to-like decline. Thus, there is a risk of slow recovery, which could extend well beyond H1FY21," the brokerage said.

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