Disruptions in store operations impacting revenue, may face problem of excess inventory: D-Mart

According to the company, in general, more than 80% of its stores are operating for a significantly lower number of hours

Avenue Supermarts Ltd, which owns and operates retail chain D-Mart, on Saturday said it is having an "adverse and severe impact" on its revenues due to "significant disruptions" of its store operations from March 2021 onwards.

Besides, D-Mart may also have to face a challenge of "excess inventory" as with the receding threat of the pandemic and sales surge in the last two quarters, it had optimistically made plans.

According to the company, in general, more than 80 per cent of its stores are operating for a significantly lower number of hours (not exceeding four hours per day) or are even shut for operations for one-two weeks or shut on weekends.

"These shutdowns are having an adverse and severe impact on its revenues," said Avenue Supermarts while updating impact of the second wave of Covid-19.

The restrictions and local-level enforcement, imposed after a substantial surge in cases in Covid-19 cases, have become much stricter and vary from store closures on certain days or for extended periods, to restricted store operating hours and selling only essential goods in most cities and towns.

Interestingly, the company which is receiving normal supply may face a situation of excess inventory due to a limited number of hours of sales.

"We currently continue to receive a regular supply of goods from our suppliers. However, this time, we may have a problem of excess inventory — an issue larger than the first wave," it said.

The receding threat of the pandemic and consequent sales surge in the third quarter and most of the fourth quarter, followed by the oncoming summer and back-to-school season, made us plan more optimistically.

"This could have a longer-term impact on our inventory to sales ratio as we could take comparatively longer time to liquidate the excess inventory," it added.

While comparing the second wave of the pandemic with the previous year, D-Mart said a key difference is that the healthcare fraternity and government authorities have better knowledge to tackle the pandemic. "Additionally, we now have the benefit of multiple vaccines being available for all adults in the country."

It, however, added that more frequent lockdowns are expected across cities and towns. "This trend is likely to continue until a large part of the population is vaccinated and new infections reduce significantly and remain like that for a long period of time."

Avenue Supermarts has also expanded DMart Ready, its e-commerce operations adding more cities to the network.

In 2020-21, it has opened 22 stores and also converted two of its existing stores into fulfilment centres for its e-commerce services.

"We continued the expansion of our e-commerce business and increased our presence across the MMR (Mumbai Metropolitan Region). In addition, we commenced servicing in four new cities during the last year — Ahmedabad, Pune, Bengaluru and Hyderabad," it said.;

As of March 31, 2021, Avenue Supermarts was operating 234 operating stores with a total retail business area of 8.82 mn sq ft.

On Saturday, Avenue Supermarts has reported a 15.5 per cent decline in its consolidated net profit to Rs 1,099.43 crore. It was Rs 1,300.98 crore in the previous year.

Its revenue from operations in the fiscal was down 2.92 per cent to Rs 24,143.06 crore. It was Rs 24,870.20 crore in 2019-20.

However, for the January-March quarter, it had reported an increase of 52.56 per cent in its consolidated net profit at Rs 413.87 crore. Its revenue from operations in the fourth quarter of 2020-21 was up 18.47 per cent to Rs 7,411.68 crore, against Rs 6,255.93 crore a year ago.