Avenue Supermarts, the parent company of retail chain DMart, has reported a decline in its profitability metrics for the fourth quarter of FY25. The company’s consolidated net profit stood at Rs 551 crore on revenue of Rs 14,872 crore, with a PAT margin of 3.7%. This is the lowest quarterly PAT margin the company has reported since at least Q4 FY23. The consolidated EBITDA margin for the quarter was 6.4%, also the weakest in the last 12 quarters.
The decline in profitability is attributed to increased competitive intensity in the FMCG space, which has impacted the company’s gross margins. Additionally, the surge in wages of entry-level positions and continued investments in improving service levels have also affected the quarter’s performance. The company’s revenue growth has been steady, but the contribution from high-margin non-FMCG and general merchandise and apparel segments remains flat.
DMart continues to expand its store footprint, adding 50 new stores in FY25, taking the total count to 415. The company has reported that two-year-old and older DMart stores grew by 8.1% during the quarter, driven by increased footfall. The retailer is performing significantly better in non-metro towns as compared to metros.
The company’s CEO and MD, Neville Noronha, has cited the key reasons for the slowdown in Q4FY25, including increased competitive intensity and surge in wages. He also mentioned that the company is focused on improving its service levels for faster turnarounds on availability, checkouts, and future store openings.
In other news, Anshul Asawa will take charge of all operational aspects of the retail business in the next 4-5 months, while Noronha will dedicate more time to store-opening acceleration, e-commerce capacity build-up, and other non-retail aspects of the business. The company’s full-year results for FY25 show a consolidated PAT margin of 4.6% and a consolidated EBITDA margin of 7.6%, both of which are lower than the previous year.
Overall, Avenue Supermarts is facing challenges in maintaining its profitability margins despite steady revenue growth. The company is focusing on improving its service levels and expanding its store footprint to drive growth, but it needs to address the challenges in the FMCG space and manage its costs effectively to improve its margins. The appointment of a new CEO designate and the change in leadership roles are expected to bring new strategies and focus to the company’s operations.