DMart Q4 PBT growth slows amid curbs; Ebitda margin contracts by 80 bps

Avenue Supermarts, which runs the DMart chain of stores in India, reported a profit before tax (PBT) of Rs 346 crore for the quarter ended March 31, 2020 (Q4FY20), a year-on-year rise of 9.1 per cent. DMart typically reports double-digit PBT growth every quarter on account of its high efficiency levels.

The slowdown (in PBT growth) has come as the company faced “severe restrictions” because of the nationwide lockdown, announced in the second half of March.

While its top line grew 23 per cent year-on-year to Rs 6,194 crore in Q4, the retailer said in a note on Saturday that March saw revenue growth of just 11 per cent, since footfalls were significantly impacted due to the lockdown.

“Most of our stores remained closed for operations. And the stores that were open operated for restricted hours as directed by local authorities. We sold only essential items and stopped the sale of all non-essential products,” the company said.

A poll of analysts by Bloomberg had pegged the firm’s Q4 revenue at Rs 6,330 crore. Net profit for the quarter came in at Rs 287 crore, a rise of 41 per cent from a year ago. It was still below the consensus estimate of Rs 313 crore polled by Bloomberg.

Earnings before interest, tax, depreciation and amortisation (Ebitda) margin in Q4 for DMart contracted by 80 basis points to 6.7 per cent from a year ago, hit on account of the inability of the retailer to sell apparel and general merchandise, considered high-margin products.

Net profit margin at 4.6 per cent in the March quarter was in line with the number reported a year ago (4 per cent), but was down sequentially by 120 basis points (5.8 per cent in the December quarter). One basis point is one hundredth of a percentage point.

The retailer, however, warned that the fiscal year 2020-21 (FY21) would be challenging on account of the Covid-19 crisis.

“Challenges are likely to continue in FY21 as the economy gradually opens up. Our new store openings will be impacted as construction activity will commence with some lag due to availability of labour and material and the onset of the monsoon from mid-June onwards,” the company said.

While the company opened 18 stores in Q4 and 38 stores in total in FY20, analysts expect the number of new store openings to be significantly lower in FY21. Same-store sales growth (SSG) at 10.9 per cent for FY20 was lower than the 17-21 per cent SSG range the company has seen in the last few years.

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