DMart Q1 FY25 earnings preview: strong growth anticipated

The DMart parent is anticipated to record a 17.5% on-year rise in earnings to Rs 13,938 crore.

Rakesh Damani-led Avenue Supermarts (DMart) is set to present its earnings report for the first fiscal quarter of FY25 on July 13. High productivity and expansions in its footprint are expected to drive significant sales growth.

Revenue and Profit Projections

According to a Moneycontrol poll, DMart is expected to record a 17.5% year-on-year rise in revenue, reaching Rs 13,938 crore. Net profit is projected to surge 21%, from Rs 659 crore in the corresponding quarter of the previous fiscal year to Rs 798 crore.

Earnings estimates of analysts polled by Moneycontrol are in a narrow range, so any positive or negative surprises may elicit a sharp reaction in the stock.

Key Drivers of Earnings

Rising Revenue Per Square Foot:Over the past four quarters, revenue per square foot has been increasing. During the preceding three years, this metric remained subdued due to the addition of large-size stores and weak discretionary spending, which typically contributes 23-25% of revenue.

This trend has been reversing gradually, as seen from the narrowing gap between revenue/store growth and revenue/square foot growth, according to Motilal Oswal.

Store Additions:In the recent quarter, Avenue Supermarts added six stores, bringing its total store count to 371 across the country. This follows the addition of 24 stores in the fourth quarter of the previous financial year and three stores in the same quarter last year.

Stable Margins:Gross margins are expected to remain stable, with an improvement in the contribution from the high-margin segment of general merchandise & apparel (GM&A).

Nuvama Institutional Equities anticipates DMart to report a gross margin of 14.6%, consistent with Q1FY24, though slightly below the pre-Covid Q1 average of 15.7%.

Analysts’ Focus

Analysts will closely monitor the same store sales growth (SSSG), revenue per square foot changes, and the gap between revenue/store and revenue/square foot. These metrics will provide insights into the company’s operational efficiency and growth sustainability.

In summary, DMart’s strong performance is likely to continue in Q1 FY25, driven by rising revenue per square foot, stable margins, and ongoing store additions. However, analysts and investors will be vigilant for any surprises that could impact the stock’s reaction.