Avenue Super.Q1 FY27
Avenue Super. Q1 FY27 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹3,910P/E: 83.3Market Cap: ₹2.5L CrSector: Retailing
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- →Avenue Supermarts targets a store expansion rate of around 15% annually based on its current base, aiming for steady growth.
- →The company expects to continue entering new states and building store density in both new and established markets.
- →Sales growth in recent years has been around 16%, reflecting robust expansion efforts.
- →Like-for-like (LFL) store growth for stores older than two years was about 8.1% in the last year.
- →Revenue per square foot remains stable, indicating efficient utilization of retail space.
- →Online (DMart Ready) operations aim for sustainable profitability while focusing on assortment, delivery speed (within 6 hours), and user experience in 11 key cities.
- →The business plans to improve order density, throughput, and overall productivity for growth.
- →Productivity in newer smaller town stores may be lower initially but is expected to improve over time, supported by lower operating costs.
- →There is a significant runway for growth as many customers still transition from unorganized to modern retail channels.
Margin guidance
Category 3- Like-for-like (LFL) growth is expected to be close to last financial year levels (7.5%-8%), though visibility beyond FY27 is uncertain due to varying factors. (Page 35)
- Gross margins are anticipated to stay in the 14%-15% range with a focus on passing sourcing/productivity benefits to customers, maintaining value leadership. (Page 28)
- Net margins are aimed to remain around 5%, without sacrificing customer value proposition, implying stable profitability going ahead. (Page 19)
- Store expansion is targeted internally at about 15% annually (~75 stores), supporting gradual growth but factoring in real estate availability constraints. (Pages 14, 28)
- E-commerce losses have been significant but the company is focused on making online operations profitable and sustainable before scaling further. (Page 19)
- Return on equity (ROE) currently at 13%-14% with expectations that existing stores will generate sufficient capital for expansion over next 2-3 years, reducing reliance on debt. (Page 34)
Overall, stable earnings and operating profit growth with cautious expansion and margin discipline are expected.
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Fundraise plans
Yes- →Avenue Supermarts Limited is currently undertaking a fundraising effort because the prior capital raised in 2020 has been utilized.
- →They anticipate needing external capital for expansion in the next 2-3 years, although they expect existing stores to generate sufficient capital eventually, reducing the need for further borrowing.
- →The company has approval for INR 1,000 crores of Non-Convertible Debentures (NCDs) to manage capex and reduce borrowing costs, which may add to current commercial paper (CP) borrowings, potentially increasing total debt to around INR 2,000 crores by year-end.
- →They are open to long-term borrowing to avoid interest rate risk associated with short-term CP markets.
- →No specific mention of new equity fundraising in this period; focus is on managing debt for expansion and cost efficiency.
Order book
The provided document pages do not explicitly mention the current or expected order book or pending orders for Avenue Supermarts Limited. However, related insights include:
- The company is focused on expanding its store base, targeting a 15% year-on-year increase in store openings (around 75 stores annually from a base of ~500 stores).
- Real estate acquisition and construction timelines affect store openings; some stores are leased to accelerate growth.
- E-commerce (DMart Ready) is being scaled sustainably in 11 cities, targeting profitable delivery under six hours.
- The company is confident in maintaining expansion plans with a strong pipeline of store openings and readiness to consider leasing.
No direct quantitative data on order book or pending orders is disclosed in these excerpts.
Capex plans
Yes- →Avenue Supermarts is planning continued capital expenditure primarily to fund store expansion and build its network, with a capex of over INR 4,000 crores in the past year.
- →The company has approved INR 1,000 crores in Non-Convertible Debentures (NCDs) to manage and reduce the cost of debt and to support longer-term borrowing for capex stability.
- →Expansion plans target around 15% annual store growth, roughly 75 stores per year, with flexibility for some leasing along with owned stores, addressing real estate bottlenecks.
- →The store expansion involves land acquisition with a 2-3 year conversion timeline, maintaining a pipeline of 2-3 years of projects.
- →Technological investments are being made broadly across systems, including ERP upgrades, to improve operations, supply chain, and data utilization, with marginal near-term margin impact.
- →The company is open to strategic or inorganic opportunities, especially in quick commerce, though no specifics were disclosed.
How does Avenue Super. rank vs peers in Retailing?
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