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NISHA Nayak made post

Why did the stock of Avenue Supermarkets fall so sharply on 13 July?

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3 weeks ago

Avenue Supermarts fell 6% in the midst of a robust market as the numbers really disappointed the street for the Mar-20 quarter. Net profits had fallen by 87.61% due to the lag effect created by the lockdown. D-Mart’s PAT margin also declined to as low as 1% from a level of 5.5% a year earlier. Even revenues were down by more than a third in Mar-20.

The company confirmed that the restrictions had a significant impact on operational and financial performance of the company during the Mar-20 quarter. Total revenues, EBITDA and net profits for the Mar-20 quarter were significantly lower on a YOY basis. As of July 2020, nearly 20% of the stores of Avenue Supermarts are still shut due to lockdown.

Most brokers have given sell calls on the stock with the worst case scenario predicting up to 35% lower price targets compared to current market prices. Lower merchandise sales were on account of lower demand and the lack of permission to sell non-essentials in stores located in certain areas. Most brokers have cut earnings estimates by up to 15-20%.