Consumers are again buying non-essential items, a sign of reviving demand as the Indian economy recovers from the twin blows of a cash purge and a new sales tax.
That's what the earnings of D-Mart parent Avenue Supermarts Ltd., India's largest retailer by market value, suggest. Standalone net profit jumped 65.8 percent over a year ago to Rs 252 crore in the quarter ended December, it said in an exchange filing. It was driven by sales of its high-margin products.
“Discretionary products sales were higher in the quarter ended December. That's a very positive sign from a consumer demand perspective,” Neville Noronha, managing director and chief executive officer at Avenue Supermarts, told BloombergQuint in an interview. “It's impacted our gross margin positively.”
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Prime Minister Narendra Modi's clampdown on 86 percent of currency in November 2016 had changed the consumption pattern. The cash crunch forced consumers, especially in rural India, to buy only essential items and in smaller packs. Barring staples and food items, demand for consumer goods had slowed down or stagnated. The demand is now recovering.
Avenue Supermarts' net sales rose 22.6 percent year-on-year to Rs 4,095 crore in the third quarter. Operating margin widened to 10.3 percent from from 8.6 percent.
The supermarket chain plans to improve the pace of opening new stores. “There is an opportunity to do better there,” Noronha said. It has 141 stores across 10 states and union territories. “15-20 stores is what we have always been saying. We will do that or we will try to better that.”
The board also approved the acquisition of 50.79 percent stake in Avenue E-Commerce Ltd. After the transaction, it will become a wholly owned subsidiary of Avenue Supermarts.
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