DMart business booms with re-opening of Schools and Arrival of Monsoon in India

    Children returning to school in raincoats while carrying bags is a sight to behold. Along with the parents, Radhakishan Damani, the owner of DMart and one of India’s wealthiest men, has been quite pleased.

    During the June quarter, people swarm to DMart to buy school supplies such as backpacks, books, stationery, shoes, and other necessities for uniforms as well as umbrellas, raincoats, and rain boots. These sales have returned after a two-year hiatus, and DMart’s fortunes have improved as well. For the three months ended in June, its revenues increased six times to 10,038 crores.

    Damani sought “one disruption-free quarter” after being weighed down by a lockdown or two every three months for the previous two years. Given that June was the first such month for the owner of a store chain that has been affected by online ordering, inflation, and subsequently weaker consumer attitude regarding FMCG necessities, it appears that he received more than he had hoped for.

    credit: businessinsider

    DMart has also been growing, and in the previous three years, it has built 110 contemporary storefronts, increasing its footprint from 30,000 square feet to 50,000 square feet. 

    The term “modern stores” here refers to larger, better constructed retail locations built to accommodate more foot traffic, meaning their revenues will be significantly higher than those of the original DMart locations. The old stores, however, also experienced significant volume growth, which is a favorable development for investors.

    “These modern stores (41% of total) couldn’t operate at full capacity since last stores years due to Covid but have done extremely well during 1QFY23,” said IDBI Capital.

    However, despite being historically high, the business cautioned that June sales should not be taken as a norm. The coming quarters will provide a clearer picture of DMart’s revival after its sales and profitability nearly collapsed in 2020–21.

    “There has been a very good recovery of overall sales. However, this quarter’s performance is not comparable to the same period last year due to the second wave of Covid-19 during that time,” the company said in its exchange filing.

    credit: businessinsider

    The complete narrative of DMart’s recovery will be revealed over the ensuing quarters, as lockdown-related sales decline and margins nearly touch zero in 2020–21. Growing sales, however, suggest a positive trend that people are purchasing more discretionary goods at a time when FMCG growth is restricted due to high prices.

    “In old DMart stores, positive volume growth in the discretionary segment is encouraging. We have marginally adjusted our earnings per share (EPS) estimates upwards by 3-4% during FY23-24E as we expect a better revenue mix from the modern large size stores,” the report added, maintaining DMart as a ‘high conviction buy’.

    As a result of the retail chain providing a sneak peek of its revenues a week earlier, DMart has experienced a 15% increase in value over the past five days. This has enthused investors who regularly monitor corporate profits as a cue in unpredictable markets.

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