Avenue Supermart, the operator of D-Mart retail chain, witnessed a 4% slide in share price as traders were seen taking profit after the Radhakrishnan Damani owned company fiscal fourth quarter earnings (Q4FY20) disappointed investors on the margin front.
Earnings before interest, tax, depreciation and amortization (EBITDA) margin contracted 68 basis points to 6.6% in Q4FY20 from 7.35% in Q4FY19, hit by higher depreciation and employee costs.
The margins have seen erosion as regulations did not permit them to sell any apparel and general merchandise products.
The trend rapidly deteriorated in April during which more than half of the D-Mart stores remained closed for operations or operated for extremely restricted hours. As some of the restrictions continue, the company is seeing reduced sales and lower than usual footfalls in its stores.
The company expects the impact of nationwide lockdown to continue in the April-June quarter earnings.
Significantly large EBITDA declines are to be expected due to lower sales, lower gross margins, higher cost of operations on account of hardship allowance to front line staff during lockdown and higher personal hygiene/store sanitation costs.
D-Mart reported a single digit-8.3% on year (YoY) growth in consolidated profit before tax (PBT) at Rs 333 crore, as against Rs 308 crore in the corresponding quarter of the previous fiscal. Its consolidated net profit grew 41.6% YoY at Rs 271 crore compred with Rs 192 crore in the same period last year.
Revenue from operations during the quarter increased 23.59% YoY to Rs 6,256 crore from Rs 5,062 crore. However, during the month of March 2020, it grew by just 11% over March 2019 due to the lockdown effect of the last 9 days of March this year.
Besides, the full extent to which the pandemic will impact in company’s future financial results will depend upon upcoming developments, which are highly uncertain including any new information concerning the severity of the pandemic and the action to mitigate its spread as advised by local authorities.
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