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Avenue Supermarts Ltd

| Transcript of Analyst/ Institutional Investors Meet 30 July 2025

NEUTRAL SENTIMENT

Report Source

⬤30th Jul 25

Summary : DMart maintains a positive outlook, focusing on accelerated store expansion and value-driven e-commerce, while navigating competitive pressures and cost challenges.

Management Perspective positive : Our business has been resilient overall in delivering us the desired growth rates. We see a tremendous headroom to grow both in the offline and the online channel. We are more confident now about how we should approach the DMart Ready Business. We continue to remain very, very bullish on the offline space. I'm very, very confident, very, very bullish that we will be able to accelerate store openings. We are charting our own course, and we are fine. I think there's an infinite opportunity from that standpoint.

Concall Report Analysis & Insights

Business Overview

  1. DMart's business has been resilient despite competitive offline and online markets.
  2. Revenue share across food, non-food, and general merchandise & apparel remained consistent.
  3. DMart Ready business pivoted to a home delivery focused model.
  4. Opened 50 stores last year, targeting 10-20% annual base store growth.
  5. India offers immense potential for value retail expansion across population strata.

Future Growth Prospects

  1. Tremendous headroom to grow in both offline and online channels.
  2. Huge opportunity for expansion in North India's white spaces.
  3. Accelerating store additions is a priority, aiming for faster growth.
  4. DMart Ready business grew 21-22%, with plans for more fulfillment centers.
  5. Long-term opportunity for private label expansion and new categories.
  6. Total Addressable Market suggests approximately 1,800 additional stores.
  7. Pharma business (Reflect Healthcare) shows encouraging results for scaling.

Management Insights

  1. Business is resilient and competing well in both offline and online channels.
  2. DMart Ready has pivoted to home delivery, with a more confident approach.
  3. Very bullish on the offline space, seeing India as a huge value retail opportunity.
  4. Gross margin is slightly better, but competition and mix shift impact profitability.
  5. DMart operates on the principle of value, retaining minimal margin for customers.
  6. North India expansion is a key focus, with personal attention to real estate acquisition.
  7. Private label is a long-term game, requiring significant effort against strong brands.
  8. DMart Ready customers are less price sensitive, prioritizing home delivery.
  9. Indian consumers are highly price sensitive, leading to volume pickup during deflation.
  10. E-commerce scale-up speed is a strategic choice, not limited by tech capabilities.
  11. Accelerating store expansion is a top priority, aiming for more stores annually.
  12. DMart's core strength (moat) lies in its gross margin and deep value proposition.
  13. DMart Ready targets 6-hour delivery, not immediate quick commerce delivery.
  14. Focusing on improving store execution and service levels by increasing headcount.
  15. Private label strategy follows a '20-20-20' principle for share, price, and margin.
  16. New states will see calibrated growth, but management is optimistic.
  17. DMart Ready fulfillment centers must be separate from physical stores for efficiency.
  18. Subsidiary businesses like pharma complement the main DMart store format.

Signs of Skepticism

  1. Moderation in return on net worth and capital employed from prior year numbers.
  2. Avenue E-Commerce's loss slightly widened to about 7%.
  3. Food Plaza subsidiary registered a loss due to its expansionary phase.
  4. Slight deterioration in gross margin from management's aspiration.
  5. Apparel segment continues to be softer compared to general merchandise.
  6. Perception that DMart is primarily for middle and lower-middle class customers.
  7. DMart Ready customers are less price sensitive than store shoppers.
  8. Reluctance to launch small revenue D2C brands on the platform.
  9. Return on Capital (ROC) has slightly moderated over the last two years.
  10. New stores incur higher operating costs than existing mature stores.
  11. Increased transportation and labor costs impacting DMart Ready margins.

Risk Factors

  1. Continuous, price-led competition in the FMCG space.
  2. Margin impact from mix shift towards lower-priced non-FMCG products.
  3. Softer performance in the apparel segment compared to general merchandise.
  4. Challenges in acquiring high-quality real estate for expansion.
  5. Intense quick commerce competition with high convenience and discounting.
  6. Rising employee wages and warehousing costs impacting profitability.

Good To Know

  1. Niladri Deb, CFO, is leaving his role after this analyst meet.
  2. Anshul Asawa, CEO Designate, joined DMart after 10 years at Unilever.
  3. DMart recorded 35.3 crore bill cuts and 8.4% like-for-like growth for 24+ month stores.
  4. Added 2 million square feet of operating space, with INR34,000 revenue per square foot.
  5. Consolidated sales were INR59,358 crores, with PAT of INR2,707 crores (4.6% margin).
  6. Avenue E-Commerce sales grew 21%, with a loss of INR247 crores.
  7. Align Retail (packaging subsidiary) grew 19%, with PAT growth of 13%.
  8. Neville Noronha will remain Managing Director until January 2026.
  9. DMart's employee attrition rate fell from 13.9% to 11.3% last year.
  10. DMart stores typically hover around 40,000 square feet in size.
  11. Seven Reflect Healthcare (pharmacy) stores are currently operational.

Key Drivers

  1. Accelerating store expansion across India.
  2. Growing presence in North India markets.
  3. Expanding DMart Ready home delivery.
  4. Increasing private label contribution.

Key Analyst Discussions

Competitive Environment

  1. Questions on DMart's resilience against offline and online competition.
  2. Discussion on onboarding D2C brands and their margin impact.
  3. DMart Ready's positioning and strategy versus quick commerce.
  4. Impact of quick commerce on DMart's same-store sales.
  5. How DMart competes with private label heavy retailers in new markets.

Market Trends & Consumer Behavior

  1. Questions on India's changing consumption patterns and market trends.
  2. Discussion on consumer price sensitivity and volume response to deflation.
  3. Inquiry about shifting consumer preference towards convenience versus value.
  4. Understanding the customer cohort preferring quick commerce over DMart's value.

Financial Highlights

  1. Questions on the dip in gross margin and EBITDA margin.
  2. Inquiry about the moderation of Return on Capital (ROC).
  3. Discussion on stagnant revenue per square foot despite inflation.
  4. Questions regarding EBITDA and PAT growth lagging revenue growth.
  5. Inquiry about comfortable debt-equity ratio and target ROE.

Product Composition

  1. Questions on the logic of combining commoditized and branded food categories.
  2. Inquiry about increasing private label share in general merchandise and apparel.
  3. Discussion on D2C brands' sales contribution and margin accretion.
  4. Questions on the shift in general merchandise and apparel contribution to sales.

Strategic Considerations

  1. New CEO's initial thoughts on joining the retail sector and India's market.
  2. Strategy for evolving new clusters in North India, particularly Uttar Pradesh.
  3. Ambition for structural growth and store expansion over the next five years.
  4. Areas where DMart could have improved, specifically store expansion pace.
  5. Rethinking organizational structure and people leadership post-transition.
  6. DMart Ready's next phase and long-term profitability outlook.
  7. Investments made to improve customer experience and service levels.
  8. Strategy for distribution center expansion and concentration.
  9. Questions on DMart's Total Addressable Market (TAM) for stores.
  10. Plans for scaling up the Reflect Healthcare (pharma) business.
  11. New CEO's non-negotiable strategy points and areas for challenge.
Avenue Supermarts Ltd (DMART) Concall Report Analysis & Insights | Dhanarthi