Why DMart Share Price is Falling

It's that time of the year! When markets are buzzing with quarterly and annual results of various companies.

A new financial year has started, and one by one different companies are coming out with their results for the March 2023 quarter. One such company is Avenue Supermarts - the parent company of DMart.

For the March 2023 quarter, the company reported a 20% YoY rise in standalone revenue at Rs 103.4 billion (bn). Its revenue stood at Rs 86.1 bn in the same period last year.

The company also reported a 7% YoY in net profit.

Thus, it would suffice to say that the company had a decent last quarter. Yet, despite posting good quarterly numbers its share price has suffered lately.

Let's take a look why the stock is under pressure.

Dull business prospects

The company initially planned to reach to 419 stores by end of March 2023, but missed its target. As of 31 March 2023 the company owns 324 stores. Thus, new store add on is very less due to the conservative approach of management.

The company is also facing strong competition from big players such as Reliance Retail and Tata Big Basket. Also the growing popularity of online shopping hurts the company's traditional brick and mortar business.

The onslaught of competition from quick service online players like Zepto, Blinkit, Swiggy's Instamart is slowing the company's business.

Apart from this the company's sales mix is also deteriorating. Of late, its non-FMCG and discretionary businesses are not doing well which is dragging down the company's overall profit margins. Inflationary pressures added insult to the injury of decreasing profit margins.

The deterioration in sales parameters is a result of a 3x increase in stores within emerging clusters and a 100% increase in the number of stores with less than two years' vintage.

The world is no longer threatened by Covid-19. However, the pandemic led bloom still continues to impact business around the world.

DMart is also struggling from the same as the company faces slow recovery post pandemic. Sales of discretionary items in the non-FMCG segment were recovering, but are yet to match pre-pandemic levels.

The company is currently trading at a PE ratio of 94 times, this indicates that the company may be overvalued. Thus expensive valuations combined with low growth triggers are dragging down DMart's share price.

How DMart share price has performed recently

In the past one month, shares of DMart are up around 1.5%. On a YTD basis, DMart is down 14.3%

DMart has a 52-week high of Rs 4,606 touched on 02 September 2022 and a 52-week low of Rs 3,185.1 touched on 16 May 2022.

About DMart

Avenue Supermarts is an Indian retail corporation that operates a chain of hypermarkets in India. It was founded by Radhakishan Damani in 2002, with its first branch in Powai's Hiranandani gardens.

Its stores are present in Maharashtra, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, National Capital Region, Tamil Nadu, Karnataka, Uttar Pradesh, Daman, and Punjab.

To know more check out the company's factsheet and quarterly results.

You can also compare the company with its peers:

Avenue Supermarts vs V-Mart Retail

Avenue Supermarts vs Spencers Retail

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