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Better productivity, store addition boost revenue

* DMART’s 2QFY24 standalone revenue grew 19% YoY to INR123.1b (est. INR127.7b), driven by 11% store additions and 7% growth in revenue per store to INR1,485m (annualized). On a sequential basis, revenue inched up 6%, mainly led by footprint additions and improved thru-put.

* Revenue per sqft increased by 6% YoY to INR35,869, indicating signs of maturity for larger stores added recently. 

Signs of recovery

* Revenue per sqft, which remained subdued in the recent past mainly due to the addition of larger store sizes and weak discretionary spending, is now seeing a pick-up. It is evident from the reducing gap between the revenue/store growth and revenue/sqft growth in the last three quarters (revenue/sqft improved from INR31,807 in 4QFY23 to INR35,869 in 2QFY24) (See Exhibit 2).

* We believe the improvement in revenue per sqft indicates improved contribution from larger stores.

* Industry-wide commentary has indicated a persistent slowdown in the discretionary category in 2QFY24, which may be still hurting the nonfood category (25-30% of revenues). However, it is expected to improve in 3QFY24 with the onset of festive demand.

Store addition picks up

* The company added 9 stores in 2QFY24 (vs. 8 stores added in 2QFY23), taking the total count to 336 stores. It added 12 stores in 1HFY24.

* We expect the company to add 40 stores in FY24, with a majority of them being added in 2HFY24, which is in line with its historical trend. 

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