avenue supermarts: Q2 preview: Avenue Supermart may see its profits drop by a third

MUMBAI: Radhakishan Damani-owned Avenue Supermarts may see its profit drop by at least a third in the quarter ended September due to lower footfalls on the back of extended lockdowns amid the Covid-19 pandemic.

Kotak Institutional Equities expects the company’s net profit to drop 33.5 per cent year-on-year (YoY) to Rs. 221.7 crore, while it sees a 11.7 per cent dip in revenues to Rs 796.1 crore.

“We model 12 per cent YoY decline in revenues of Avenue Supermarts as we bake in the impact of irregular store operations due to extended lockdowns, reduced sale of general merchandise and lower footfalls,” Kotak Institutional Equities said in a note.

The brokerage also expects YoY margin contraction on account of lower sales of general merchandise and apparel, and expects four new stores to be added in 2QFY21 due to resumption of construction and expects commissioning activity though revenue contribution from these stores in 2Q to be muted.

Citigroup expects Avenue Supermarts’ net profits to decline 37 per cent from a year ago, while it foresees a 11 per cent decline in sales.

Edelweiss expects a 14 per cent YoY dip in revenue due to lower footfall and weaker sales of non-essential items.

“Lower discounting/absence of incremental costs on business initiatives as incurred in Q1 are, however, likely to aid margin,” the brokerage said.

It estimates EBITDA to dip 32 per cent YoY, and pegs EBITDA margin at 6.8 per cent from 8.6 per cent a year ago.

Avenue Supermarts that owns the retail chain DMart was founded by Radhakishan Damani in 2002. DMart currently has 216 large format stores in India.

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