Chief Executive Officer and Managing Director Neville Noronha
Chief Executive Officer and Managing Director Neville Noronha

MUMBAI: Beating estimates for the second quarter in a row, Avenue Supermarts Ltd today reported a 66-basis-point on-year expansion in Jul-Sep operating margins to 8.66% due to a rise in sales of higher-margin products.

"...gross margin saw improvement over the corresponding period last year due to better revenue mix," Chief Executive Officer and Managing Director Neville Noronha said.

Analysts had expected the operator of retail chain D-Mart to report a contraction in margin. The company's profitability had contracted for the three straight quarters till Jan-Mar due to focus on "Low-cost Low Price" strategy.

The company's sales grew 22% on-year to 59.5 bln rupees in the September quarter, aided by addition of new stores.

After opening eight new stores in Apr-Jun, the company added five more in the reporting quarter.

ICICI Securities had earlier said that it expects the company to add 30 stores annually till 2020-21.

The retailer saw a 48% jump in net profit for the quarter to 3.3 bln rupees, aided by a cut in corporate tax rate. In September, the government announced a cut in the effective tax rate for domestic companies to around 25% from over 33%.

In the September quarter, the company's tax outgo fell 27% to 899.5 mln rupees, despite a 21% rise in the profit-before-tax figure.

In 2018-19 (Apr-Mar), the effective tax rate of Avenue Supermarts was 35.8%.

However, sales and net profit of the retailer were marginally below consensus estimates of 60.8 bln rupees and 3.5 bln rupees, respectively.

Most brokerages, in their pre-earnings note, had expected robust same-store sales growth, but the company did not provide any information on the same.

The company's total expenditure rose 22% to 55.3 bln rupees in Jul-Sep.

In the quarter ended June, the company had posted a net profit of 3.35 bln rupees on net sales of 57.8 bln rupees.

On Friday, shares of the company closed 1.2% higher at 1,843.20 rupees on the National Stock Exchange.

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