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D-Mart 2QFY23 pre-quarter update

Revenue growth remains weak (10% lower on a LTL basis), adds eight stores in 2QFY23 (in line)

Revenue grew 36% YoY

* Standalone revenue grew 36% YoY to INR103.8b, 6.4% below our estimate. While overall revenue growth remained strong, calculated LTL growth in 2QFY23 was 2% YoY when adjusted for footprint addition. As compared to pre-COVID levels of 2QFY20, this was lower by 10% (the company doesn’t provide quarterly SSSG).

* Same store sales continue to post a decline: Blended revenue per sq. ft. grew 2% YoY to INR33,727. This was 10% lower as compared to preCOVID levels (2QFY20).

* Our channel checks indicate a soft performance in the Value segment, which may have hurt the ‘non-Staple’ category segment that constitutes 25-30% of the revenue pie. It has also increased its average store size to ~41.5k sq. ft. v/s 34.4k sq. ft. in FY20. The management previously indicated that a higher store size takes longer to reach a stable revenue per sq. ft. state.

Healthy store additions persist

* DMART continued its healthy store additions. It added eight stores (in line) in 2QFY23, taking its total count to 302. It has added 18 out of a total of 40 stores factored in FY23.

* We factor in 40 store additions, 19%/14% footprint/store additions in FY23. In the last three years, it saw a strong 60%/93% cumulative store/footprint additions, despite the COVID-led lockdown.

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