14 october 2024 : Shares of Avenue Supermarts Ltd., commonly known as Dmart, plummeted by the largest margin in over five years due to concerns about the impact of online competition on its business model.
The stock dropped as much as 9.5%, marking its steepest decline since January 2019, following a report that showed net income for the three months ending in September fell short of expectations at 7.1 billion rupees ($84.5 million). Revenue growth from established stores was approximately 5.5%, the slowest in recent quarters, according to analysis by Jefferies Group.
In response to these developments, at least five brokerages have downgraded their ratings for Dmart. Some analysts pointed to the company’s structure as a concern after management indicated that online grocery services, which offer rapid delivery, were affecting sales. Dmart aims to keep prices low by owning its retail locations rather than leasing them.
Morgan Stanley analysts, including Sheela Rathi and Archana Menon, noted that “an aggressive review of the business model is required.” They emphasized that the company’s sluggish adaptation to market shifts toward convenience is beginning to negatively impact its performance. Additionally, the rise of quick commerce companies, which offer a wider range of products and increasing average order values, poses a significant challenge to traditional brick-and-mortar stores.