Avenue Supermarts Q2 Results: Net Profit Up 5.8%, Revenue Growth at 14.4%

Avenue Supermarts Ltd., the parent company of the popular retail chain DMart, has announced its financial results for the second quarter of the fiscal year 2024-2025. The company reported a net profit of Rs 659.44 crore, marking a 5.8% year-on-year increase. However, this figure fell short of analyst estimates, which were set at Rs 812 crore.

The consolidated revenue for the quarter ended September 30, 2024, stood at Rs 14,444.50 crore, representing a 14.4% year-on-year growth. This increase in revenue is a positive sign for the company, despite missing analyst projections for both net profit and revenue.

Operating income, measured as earnings before interest, taxes, depreciation, and amortization (EBITDA), rose by 8.8% year-on-year to Rs 1,093.77 crore. However, the EBITDA margin contracted to 7.6% from 8% in the same period the previous year. Analysts had projected EBITDA of Rs 1,210 crore and a margin of 8.30%.

Key Highlights of Q2 FY2025

1. **Net Profit**: The company's net profit for the quarter ended September 30, 2024, was Rs 659.44 crore, up by 5.8% from Rs 623.35 crore in the same quarter last year.

2. **Revenue Growth**: The consolidated revenue for the quarter saw a significant increase of 14.4% year-on-year, reaching Rs 14,444.50 crore compared to Rs 12,624.37 crore in the previous year.

3. **EBITDA**: Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 8.8% year-on-year to Rs 1,093.77 crore, but the EBITDA margin decreased to 7.6% from 8% in the same period the previous year.

4. **Store Expansion**: The company added six new stores in Q2 FY2025, contributing to its overall growth strategy.

5. **DMart Ready Business**: The DMart Ready business, which is the online grocery format, grew by 21.8% in H1 FY2025, indicating a strong digital presence for the company.

6. **CEO's Comments**: Neville Noronha, CEO and Managing Director of Avenue Supermarts Ltd., highlighted the impact of online grocery formats on large metro DMart stores, which operate at very high turnover per square feet of revenue.

7. **Share Performance**: Following the earnings announcement, the company's shares closed 0.76% lower at Rs 4,572.70 per share compared to a 0.14% decline in the NSE Nifty 50 index.

8. **Analyst Ratings**: According to Bloomberg data, 14 out of 27 analysts covering Avenue Supermarts recommend a 'buy' rating, five suggest a 'hold,' and eight advise a 'sell.' The average 12-month price target from analysts indicates a potential upside of 9.5%.

Challenges Faced by Avenue Supermarts

Avenue Supermarts faces several challenges in the current market environment. One of the key reasons cited by brokerages such as Morgan Stanley, Bernstein, Goldman Sachs, JPMorgan, and Macquarie is the heightened competition from quick commerce players like Blinkit.

Additionally, slower store additions and more conservative growth projections point to a more challenging operating environment for the company.

The company's like-for-like revenue growth for stores two years and older was 7.4% for the first half of FY2025, but it declined to 5.5% in Q2 FY2025. This indicates a slower pace of growth in recent quarters.

The PAT margin stood at 5% in Q2 FY2025 compared to 5.3% in Q2 FY2024, further highlighting the margin compression faced by the company.

Despite these challenges, Avenue Supermarts remains optimistic about its future prospects. The company continues to invest in its digital transformation and expansion strategies to stay competitive in the retail market.

In conclusion, while Avenue Supermarts' Q2 FY2025 results show a mixed picture with revenue growth but missed analyst estimates for net profit, the company's long-term strategy and commitment to digital innovation are likely to drive its future success.

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