The Indian retail market has been growing rapidly, driven by changing consumer behavior, rising incomes, and increasing digital adoption. Among the emerging trends, quick commerce (q-commerce) is gaining significant traction. Companies like Swiggy and Zomato, which were originally focused on food delivery, are expanding into grocery and essential goods delivery within hours. This model caters to the demand for instant gratification and convenience, positioning Q-commerce as a key player in the retail landscape.
Retail outlets in India are also evolving, with companies like D-Mart, Trent (Star Bazaar,Westside), and Reliance Retail expanding their physical presence. These retailers are focusing on offering a seamless omnichannel experience, blending online and offline shopping to capture a broader audience. As consumer preferences shift towards both convenience and experience, the future of retail outlets looks promising, with growth in both traditional and digital channels.
Share Price
The shares of DMART (Avenue Supermarkets) are currently locked at an upper circuit of 15 % at Rs. 4,152.75 as of January 03, 2025
Recent Updates
DMART’s standalone revenue has risen by 17%, from ₹13,247 crore to ₹15,553 crore, reflecting strong business growth. The company has also expanded its store count by 10, indicating its continued focus on physical expansion. This combination of higher revenue and increased store presence highlights DMART’s robust market performance.
Bearish Sentiments from Macquarie and Morgan Stanley
Macquarie and Morgan Stanley continue to express a bearish stance on DMart, citing that its growth rate remains significantly below the historical 20% top-line growth. They noted that the overall growth trajectory is weak, although Morgan Stanley acknowledged that Q3 revenue exceeded expectations by 1% the brokerage reiterated its target price on DMart shares at Rs 3,702 apiece. This positive performance was mainly driven by a 12% rise in store count, with same-store sales growth (SSSG) reaching 5.5%, surpassing their initial estimate of 4%.
Challenges from Rising Competition
Macquarie also raised concerns about the increasing competitive pressure from quick commerce, which could further affect DMart’s growth momentum. Despite a seasonal improvement in gross margins during Q3, attributed to a better product mix, Macquarie remains cautious due to this rising competition. The addition of 10 stores during the quarter aligns with estimates, indicating DMart’s steady pace of expansion, but overall competitive challenges persist.
CLSA’s Positive Outlook
In contrast, CLSA remains bullish on Avenue Supermarts, maintaining an “outperform” rating with a target price of Rs 5,360, which reflects a potential 50% upside. CLSA pointed out that DMart’s standalone revenues exceeded their forecasts, further boosting optimism about the company’s future prospects.
Focus on Private Labels for Growth
CLSA also highlighted DMart’s strategic move towards private labels, which they believe will enhance its competitive edge. By focusing on private labels—products exclusive to DMart—the company can secure better margins and improve differentiation, positioning itself strongly to compete with rising retail challenges.
Conclusion
Despite mixed views from different brokerages, DMart’s solid expansion efforts and increasing revenue are positive indicators of its future prospects. While Macquarie and Morgan Stanley are cautious about growth challenges due to competition, CLSA’s optimism reflects confidence in DMart’s strategy, especially its shift towards private labels. This strategic direction could give DMart an advantage in the evolving retail landscape.
Written by: Dipangshu Kundu
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