Five takeaways from D-Mart’s early Q2 sales data

Mumbai-based Avenue Supermarts Ltd, which owns and runs retail chain D-Mart, has come up with an early set of numbers for the three months ended September 30, 2021 that showed a rosy business climate as concerns about the Covid-19 pandemic recedes in its key operating markets.

The company’s stock had hit an all-time high two weeks back and has corrected marginally since then. But the company still commands a hefty market value of Rs 2.7 trillion. At this level it is valued over 220x its trailing earnings multiple. The stock opened more than 3% above its previous close on Monday but later moderated and was trading marginally above Friday’s close.

Here are five things that one can decipher from the numbers shared by the company.

Pick-up in consumer sentiment

Consumer sentiments had taken a big hit during the pandemic. While ecommerce activities had picked up pace quickly as people were still apprehensive about going out to shop, restrictions in movement of people had affected physical shopping. Those issues are easing now.

In fact, consumer sentiment was weakening even before the pandemic hit the economy.

D-Mart’s parent Avenue Supermarts’ Q2 sales this year were over 28.5% over the pre-pandemic sales during the corresponding quarter. This shows the weak sentiment has bottomed out and withered with the pandemic and is now poised for better days.

Q2 vs Q2—best quarter ever

On a like-to-like basis, Avenue Supermarts’ standalone revenues have risen 46.6% to Rs 7,649.64 crore for the second quarter ended September 31, 2021. The company, which is promoted by Radhakishan Damani and his family, had clocked revenue from operations of Rs 5,218.15 crore in the July-September quarter a year ago. This means it has managed to stay on double-digit annual growth rate despite the pandemic over the last two years.

It is not just the highest ever Q2 sales by the company, but also the highest level ever in any three-month period, beating the previous best during the third quarter of the last financial year.

Sequential sales uptick

The company’s sequential sales rose around 46% compared to the first quarter ended June 30. The first quarter had seen consumer sentiment slump due to the brutal impact of the pandemic’s second wave, especially in North India. Expectations of a similar wave in other parts of the country had prompted consumers to restrict spending.

Store network up

D-Mart has 12% more stores now compared to the previous year as it increased the count to 246 from 220 at the end of September 2020. Last quarter alone it added eight new stores. This shows the company has been scaling up its business despite the impact of the pandemic in its home market Maharashtra, which has been the worst hit with around a fifth of the total cases in the country and accounting for a third of the deaths to date.

The company’s stores are spread across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan.

D-Mart poised for bumper Diwali quarter?

Typically, the third quarter of a financial year is a big one for retailers as the country sees multiple festivals across the country. In fact, last year, despite the pandemic, the sequential growth in sales for D-Mart was over 41%.

If the company manages to see a similar high tide this year, it could be set for well over Rs 10,000 crore in sales in Q3 of 2020-22. If the suppressed demand gets unlocked this could also top the Rs 11,000-crore mark.