(Reuters) -Shares of Avenue Supermarts Ltd, which operates the DMart retail chain, fell 4.7% on Monday after the company’s fourth-quarter profit missed estimates and core profit margin contracted as consumers curbed discretionary spending.
DMart, which faces intense competition from Reliance Industries Ltd and is known for discounts on everything from pulses to clothes, has seen inflation-weary consumers tighten spending on non-essential purchases.
Shares of the company slumped the most in more than a month and have dropped 9.6% so far this year, as of the last close.
The retailer said in a regulatory filing on Saturday its earnings before interest, taxes, depreciation and amortization (EBITDA) margin fell to 7.3% in the quarter from 8.4% in the year-ago period.
Lower consumer spending in the general merchandise and apparel segment, which includes products such as toys, crockery and garments and accounts for around 23% of DMart’s revenue, has impacted the margin mix downward, CEO Neville Noronha said in a statement.
Jefferies analysts said DMart’s general merchandise segment underperformed the FMCG and staples division due to elevated inflation, lower footfalls in stores, and as people purchase more from e-commerce platforms.
DMart’s profit rose nearly 8% to 4.60 billion rupees year-on-year, but missed analysts’ estimate of 5.21 billion rupees, according to Refinitiv IBES data, as expenses climbed 22% to 100.02 billion rupees.
India’s retail market is dominated mostly by unorganized stores, but organized retail is gaining market share and e-commerce is accelerating.
Bernstein estimates Reliance Retail, the retail arm of Reliance, has expanded market share from 1.8% in fiscal 2018 to around 2.5%-3% in fiscal 2023, and is 2.5 times the combined size of the DMart, Titan, and Aditya Birla Fashion and Retail.
DMart’s revenue grew 20.6% to 105.94 billion rupees in the reported quarter.
(Reporting by Aleef Jahan in Bengaluru; Editing by Sherry Jacob-Phillips and Eileen Soreng)