NEW DELHI: The impact of the nationwide lockdown imposed to contain the spread of COVID-19 is beginning to show on balance sheets.
Radhakishan Damani's wealth might have been soaring, pegged as it is at $12.3 billion in the Bloomberg Billionaires Index. But, on Saturday, Avenue Supermarts Ltd., which Damani controls and which owns the DMart chain of supermarkets, admitted it could not stay immune to the general decline while reporting an 87.6 per cent fall in its consolidated net profit during the first quarter of FY2020-21 ended June.
According to Neville Noronha, CEO and Managing Director, restrictions have had a significant impact on the company’s operational and financial performance during the quarter.
"Our revenue, EBIDTA and PAT for the quarter were significantly lower as compared to the same quarter last year," he said.
Avenue reported a consolidated profit after tax of Rs 40 crore against Rs 323 crore during the first quarter of the previous financial year.
Both sales and margins tanked. Total revenue stood at Rs 3,883 crore compared to Rs 5,815 crore, down by a whole third. Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) stood at Rs 112 crore against Rs 597 crore, while EBITDA margin shrunk from 10.3 per cent to just 2.9 per cent.
Noronha also observed that organised retail in India has had a particularly tough lockdown. “While the overall lockdown rules have softened in general, they continue with the same or more severe intensity in certain cities and local municipalities from time to time. Its negative impact on footfalls and sales were significant,” he noted.
"There is also a sales channel of traditional trade which is smart, agile and resourceful. India still has a strong and resilient network of small shops and neighbourhood stores. They came roaring back after the first 2 or 3 weeks of lockdown serving the needs of an anxious customer the way the customer wanted it -- quickly over the counter or through home deliveries. Value wasn't top of mind for shoppers during this time," Noronha pointed out.
As long as stores were allowed to operate, Avenue recovered to around 80 per cent of pre-Covid sales, he observed. However, discretionary consumption continues to be under pressure, especially in the Non-FMCG categories.
"This is impacting gross margins negatively. Store operations and duration of operation per day continues to remain inconsistent across cities due to strict lockdowns enforced by local authorities from time to time," Noronha said.