DMart gains on Q1 showing, hopes of rise in demand

Shares of Avenue Supermarts (DMart) have gained about 5 per cent over the past week on better than expected June quarter (Q1FY25) performance, hopes of a recovery in discretionary demand, and margin gains going ahead.

- RAM PRASAD SAHU

The key takeaway from the results was the robust gross margin performance. Riding on improving mix, DMart posted a 34 basis point year-on-year (Y-o-Y) improvement in gross margins to 14.9 per cent. The company indicated that higher contributions from the more profitable general merchandise and apparel category led to the gross margin expansion.

Though there was an improvement, the gross margins are still lower as compared to the pre-pandemic levels (15.6 per cent/16.1 per cent seen in Q1FY20) as well as Q1FY23 (15.8 per cent), indicative of enough headroom to expand the share of discretionary categories, point out analysts led by Mehul Desai of JM Financial Research.

While the brokerage is positive on the company and has a "buy" rating, the key monitorables, according to it, are the pace of store expansion and the contribution of the discretionary category to sales.