Retailers have also been recently rushing in to open value-format stores which have impacted DMart’s apparel and general merchandise segment. Interestingly, retailers are opening shops close to DMart stores to take advantage of the huge footfalls that the discount format attracts.
In an exclusive interaction with ET, Noronha said: “We aren’t growing at 30-40% like earlier with the base effect kicking in. We need to add a significantly greater number of stores than we are adding if we need to grow faster. Our model of buying stores or having standalone stores has inherent limitations and slows us down. Shoppers come to our stores to buy groceries. While they are there they also buy other categories. Our ability to sell as much of those other categories makes the model more efficient for us and more relevant for our shoppers. That’s the endeavour,” said Noronha. Avenue Supermarts is promoted by investor Radhakishan Damani and Noronha has led the entity as CEO since 2007. As of June 2023, it has 330 stores across 14 states in India catering to the priceconscious Indian consumer.
Covid-19, commodity price surge, geo-political tensions and unusual weather have collectively made consumer demand prediction extremely complicated over the last three years, Noronha said. “Non FMCG discretionary consumption in the middle and lower income levels has been adversely impacted over the last 2-3 years. Within that the value segment of apparel has seen a larger negative impact for us. We need to now refine our assortment and make it more relevant to our format. Malls are very expensive and hence we stay away. We are trying harder to add more stores,” the executive said.
“Weak SSSG (same-store sales growth) has weighed on DMart’s stock price performance in the recent past,” brokerage firm Motilal Oswal wrote in its note last month.
Over the last five years, [FY19-23] the general merchandise and apparel segment revenue for DMart has underperformed its foods and nonfoods by 26% and 20%, respectively,” the brokerage said in a note.Avenue Supermarts’ first-quarter profit rose marginally but missed estimates, even as the profit margins shrunk owing to higher costs and weak demand in the discretionary category. “Overall gross margins are lower compared to same period in the previous year, primarily due to lower sales contribution of apparel and general merchandise,” said Noronha.“However, the general merchandise contribution is recovering and trending towards pre-pandemic levels.” The consolidated net profit of the company increased 2% over the previous year to Rs 658.8 crore in the three months to June.
