Oct 14, 2024 01:25 PM IST
Shares of Avenue Supermarts Ltd. fell 9.5% amid concerns about online competition impacting its business.
Shares in India’s Avenue Supermarts Ltd., also known as Dmart, fell the most in over five years on concern that online competition was impacting the company’s current business model.
Shares fell as much as 9.5%, the most since Jan. 2019, after net income came in below estimates at 7.1 billion rupees ($84.5 million) for the three months ended in September. Revenue from mature stores grew about 5.5% compared to last year, the slowest in several quarters, according to research by Jefferies Group.
At least five brokerages downgraded their ratings on the stock, with some citing the firm’s business structure, after management said sales were being impacted by online grocers who are able to deliver goods quickly. Dmart attempts to offer products at a lower price than its competitors by owning retail stores rather than leasing them out.
“An aggressive review of the business model is required,” Morgan Stanley analysts including Sheela Rathi and Archana Menon wrote in a note. The company’s slow response to steadfast market changes toward convenience is starting to hurt the business, they added.
Fast scaling strategies from quick commerce players, with greater numbers of product offerings and rising average order values, are affecting brick-and-mortar businesses, the analysts said.