ABFRL profit increases 5x while VMart posts loss
The retail industry continued to show a healthy recovery in the September quarter (Q2FY23) as the segment saw improved footfall. In addition to seeing healthy year-over-year growth, revenue for most retailers exceeded pre-pandemic (Q2FY20) levels, indicating a recovery from the impact of COVID.
During the quarter, a retail stock generated multiple returns, with 5 stocks’ net income jumping more than 30%, while 2 posted lower earnings and one recorded a loss in the second quarter. .
Aditya Birla Fashion and Retail (ABFRL) announced that it had quintupled (411%) its consolidated net profit to ₹29.44 crores in the second quarter of FY23, driven by strong festive sales and steady performance of e-commerce channels. The company recorded a net profit of ₹5.09 crores in the same quarter last year.
Its operating income increased by 49.66% for ₹3,074.61 crores in the quarter under review against ₹2,054.34 crores during the corresponding period of the previous financial year. The Aditya Birla Group company achieved its “highest quarterly revenue” in the second quarter of FY23, the company said in its income statement.
In an earnings review note, brokerage Motilal Oswal pointed out that ABFRL management expects overall revenue for FY23 to be between ₹12,000 crores and ₹12,500 crore, with higher sales expected in the second half of FY23. It also expects FY23 annual capital expenditures to be between ₹700 crores and ₹750 crore, with plans to open 60-70 stores in total under Pantaloons, the brokerage noted.
Meanwhile, Edelweiss said ABFRL recorded strong revenue growth across all segments and continued to expand its footprint (106 branded stores and 947 MBOs in Q2FY23).
“We expect this performance to continue in H2FY23 due to the strong wedding season and aggressive store expansion. However, we expect margins to remain under pressure due to expected increases in advertising spend and ‘other general expenses (due to standardization of operations),’ the declared brokerage.
With a strong focus on store and brand expansion, it increased its revenue estimate by 7% for FY23E and 24E, but reduced its profit estimate by 5% for FY24E given higher operating costs.
After ABFRL, Avenue Supermarkets announced a nearly 63% year-over-year increase in net profit for the September quarter to ₹730.48 crores. Revenue for the quarter increased nearly 36% year-on-year to ₹10385 crores.
Avenue Supermarts has been a consistent picker, with the stock price rising 35% CAGR over the past five years. “DMart continues to remain India’s most profitable off-price retailer and plays an important role in India’s retail growth story and a key beneficiary of the shift from the unorganized segment to the organized segment. “said brokerage ICICI Direct.
Metro brands also reported 50% year-on-year growth in net profit for the September quarter. The company’s net income rose to ₹102.7 crores in the September quarter from ₹68.3 crore during the same period last year. Its consolidated revenue increased 47% year-on-year to ₹476 crores in the quarter under review.
“Management guided a gross margin of 55-57% across all formats. They reiterated their guidance of 260 stores over the next three years. This is expected to increase with the addition of FitFlop and the Cravatex acquisitions,” said declared MOSL.
Meanwhile, bata india recorded a 47.44% increase in consolidated net profit at ₹54.82 crores in the second quarter ended September 2022, helped by an increase in store traffic. The company recorded a net profit of ₹37.18 crores in the July-September quarter a year ago, Bata India Ltd said in an ESB filing.
Its operating revenue during the quarter under review amounted to ₹829.75 crores, up more than 35.11% from ₹614.12 crores in the corresponding quarter of FY22.
“Despite a challenging operating environment and significant material inflation, the company was able to deliver broad volume-based revenue growth across the retail/franchise/distribution/e-comm business channels,” Bata said. India in its income statement.
ICICI Securities likes Bata India because it has a strong balance sheet, a diversified portfolio of branded products and a pan-India network enabling long-term profitable growth.
Further away, Titan and Thirty recorded an increase of more than 30% in its net profit. Titan reported a 34% year-over-year (YoY) increase in net profit for the September quarter at ₹857 crores. Total revenue from operations increased by 22% year-on-year to ₹8,730 crore,
While Trent reported a 41% annual increase in its own-source net income at ₹193 crore in the September quarter, driven by robust revenue. Revenues, including GST, increased 78% to ₹1,929 crores, which is the highest on record for a quarter, the company said in a statement.
Relaxo’s management said consumers were facing inflationary pressures, which affected their affordability, and they had started turning to cheaper alternatives, even at the expense of quality. Therefore, the company made an aggressive price correction in September 2022 to compete in the market, she said.
To finish, V-Mart recorded a net loss of ₹11.31 crore in the quarter ended September 2022, which narrowed from ₹14.14 crores in the same quarter last year. However, its sales jumped 50% for ₹506.16 crores in the quarter under review ₹337.97 crores last year.
Retail Sector Review
According to Motilal Oswal, the value retail segment continued to experience timid growth compared to the higher average selling price (ASP) segment. Total revenue for T2FY23 increased over 63% from pre-COVID (2QFY20) levels to ₹19,350 crores, indicating continued momentum in the recovery after COVID-related restrictions were lifted, he said.
“While the upper ASP segment continued to drive revenue growth, the Value Retail segment, with a lower ASP, continued to face the impact of inflationary pressures. This is evident from the weak performance of VMART (excluding Unlimited) and Relaxo at 2QFY23. remained 7% below pre-COVID levels. Sales of the lower discretionary ASP category (merchandise and apparel) for DMART remained weak,” he noted.
MOSL said inflationary pressure remains a controllable key. While the sector continues to see green shoots in the form of improved footfall and upcoming festive demand, continued inflationary pressures and the impact of the unseasonal monsoon in northern India may remain an overhang on demand, said MOSL. His top pick in the sector is ABFRL and Trent.
Retail Sector Review