Despite a significant increase in revenue, Avenue Supermarts Ltd recorded a modest 2.3% year-on-year (YoY) growth in net profit for the quarter ending in June, amounting to INR 695.36 crore.
The operator of the hypermarket chain announced a year-on-year revenue growth of 18% for the quarter, reaching INR 11,584.40 crore.
The board has additionally granted permission to provide employee stock options, contingent upon shareholders’ approval at the upcoming annual general meeting.
As part of the ESOP scheme 2023, the company intends to extend an offering of up to 1,500,000 options. These options, upon exercise, would entitle the holders to an equivalent number of equity shares valued at INR 10 each in the company.
“Options shall be granted to eligible employees who are in General Management “G” Grade and who are in employment of the company as on the date of grant,” the D-Mart chain operator said.
Avenue Supermarts experienced limited net profit growth due to a subdued operational performance. The company’s operating profit, which is determined by earnings before interest, taxes, depreciation, and amortization (EBITDA), only increased by 2.8% compared to the previous year, reaching INR 1,036 crore.
The operating margin experienced a significant decline of 133 basis points compared to the previous year, resulting in a current operating margin of 8.95%. This decrease can be attributed to a decrease in gross margins.
“Overall, gross margins are lower compared to the same period in the previous year, primarily due to lower sales contribution of apparel and general merchandise,” said Neville Noronha, CEO & Managing Director.
According to Noronha, the contribution from general merchandise is showing signs of recovery and is moving closer to the levels seen before the pandemic. In the quarter, the company expanded its operations by opening three new stores, bringing the total number of stores to 327.
During the quarter under review, there was a significant increase in total expenses, which surged by 20% compared to the previous year, amounting to INR 10,700 crore. The cost of employees also experienced a rise of 13.4% from the previous year, reaching INR 178 crore. In terms of taxes, the outgo for the quarter totaled INR 236.32 crore, slightly higher than the INR 230.2 crore paid during the same period last year.
