Why DMart disappoints investors

Avenue Supermarts Ltd’s September quarter results announced on Saturday have failed to enthuse investors, leading to shares dropping 3.6%. View Full Image Yet to gther steam High gas prices: How India's gas economy works Invesco to sell 5.5% Zee stake for $169.5mn Shree Cement's good show fails to impress street The average basket values improved despite lower footfalls, which bodes well for the FMCG segment’s profitability, though this has a negative bearing on the more profitable general merchandise and apparel sales. As of September end, Avenue’s stores that are five years or older saw a decent like-for-like 6.5% compound annual growth rate, versus Q2FY20. This indicates, “ slower same store sales growth for old stores, slower-than-expected ramp-up of newer stores – the company does not agree with this and maintains that new stores are ramping up well and regional differences in peak throughputs of stores," said analysts from Kotak Institutional Equities in a report dated 17 October. “We suspect the deteriorating unit economics is not just a function of high inflation keeping discretionary purchases in check but also a consequence of a fair challenge to DMart’s value proposition by deep-pocketed peers within DMart’s top districts," said HDFC Securities.