Bad Quarter Performance! A warning or Opportunity?

Bad Quarter Performance

by Tanushree Jaiswal Last Updated: Oct 17, 2023 - 11:00 am 376 Views
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Facebook's parent company, Meta, reported its first-ever annual revenue decrease earlier this year. The decline was ascribed by company executives to a sluggish economy, corporate restructuring initiatives, and Apple's new policy letting iPhone customers choose not to receive advertising.

If sales declines in your small business, there's a good chance the issue is complex. Customers can be reacting to news forecasts of an approaching economic slump, or a new rival may have joined your market. Regardless of the reason for your income reduction, there are certain actions you can do to guarantee that your company meets the challenge and emerges from this phase stronger than ever.

• Make fast, minor tweaks.

A poor month does not necessarily indicate that your company is in serious trouble, but it may be an indication that you need to make some little changes to solve the issue. Seek to make little adjustments to your company that won't affect your staff. Maybe you can improve the conditions of a vendor agreement or change your menu to include more items that are in season.

Larger, macroeconomic shifts that are beyond your control, including delays in the global supply chain, may also cause a decline in sales. If this appears to be the case, take prompt action to let your clients know how these occurrences may affect your service in the most transparent way possible.

• Observe prevailing consumer patterns

Customer preferences shift quickly. According to a new McKinsey study, customers are changing brands at previously unheard-of rates as a result of shifting priorities, store closures, and economic challenges. It's possible that what has long been successful for your company may no longer be able to adequately serve your clients going forward.

If you see a decline in sales, it might be worthwhile to use focus groups and feedback questionnaires to find out what has changed with your clientele. Perhaps all your company needs to do is implement a little adjustment, like providing curbside collection that is more handy or improving your return policy. Alternatively, you could discover that it's time to modify your product lineup to better suit the needs of customers.

• Put Excellent Customer Service First

More so than price or product, research indicates that excellent customer service is the primary factor in retaining customers. Customer loyalty and brand trust are increased via providing prompt, courteous, and attentive service.

Even when competitors' products are offered for less money, customers who experience excellent customer service are more inclined to use your brand again. However, poor customer service can completely ruin a relationship, according to The Future of Commerce.

Maintain a high standard of customer service while you make various modifications to meet the demands of your customers. All of your staff members should receive training on how to handle complaints, provide assistance to consumers, and address inquiries about your policies, services, and goods. Customers will be encouraged to stick with your brand by this constancy until you can improve your offering and emerge from this revenue slump stronger.

For example, let’s take a case of D-Mart for the Q2-FY23

Even with a YoY growth in revenue of 18.7% to Rs 12,624 crore, DMart's operating margin decreased by 40 basis points to 8%.

One can say that this quarter net income has dropped but the real wealth creator or  the fundamentals understanding keeper of this company  might look for something more than quarter decline performance.
Let’s dig in to the fundamentals of the D-mart

Metrics As of FY'23
Stock P/E 108
Dividend Yield % 0
ROCE % 20.1
ROE % 16
Debt to equity 0.04
PEG Ratio 4.4
Int Coverage 52

Long-Lived Performance

Compounded Sales Growth As of FY'23
10 Years 29%
5 Years 23%
3 Years 20%
TTM 21%
Compounded Sales Growth As of FY'23
10 Years 38%
5 Years 25%
3 Years 22%
TTM 1%

Strengths of the company:

1. Strong Position in Organized Retail Segment: The company enjoys a robust position in the organized retail sector, primarily driven by consistent same-store growth and efficient retail operations. With 324 stores operating under the DMart brand as of March 31, 2023, the company has established itself as a key player in the retail market.

2. Retail Productivity and Quick Store Expansion: The company's retail productivity is commendable, thanks to its strong procurement capabilities, competitive pricing strategies, and rigorous cost control. This combination leads to increased footfall, high inventory turnover, and impressive revenue per square foot (sq ft). In fiscal 2022, the aggregate revenue per sq ft reached Rs 29,959, surpassing many competitors in the same segment. While the impact of Covid-19 affected operating profitability in fiscal 2021, the company has shown improvement over the years.

3. Geographical Concentration and Expansion: Although the company's operations are primarily concentrated in West and South India, it plans to diversify its geographical reach by adding a significant number of stores in large clusters over the next three years. This strategic move will not only expand its market presence but also reduce geographical concentration risk.

4. Strong Track Record and Value Proposition: The company has consistently outperformed its peers in terms of growth and profitability. Its strong merchandising and compelling value proposition have been instrumental in attracting and retaining customers. Moreover, the benefits of economies of scale further bolster its competitive position in the retail industry.

5. Industry-Leading Retail Store Productivity: The company's ability to maintain high inventory turnover and revenue per sq ft, as well as its effective cost control measures, contribute to its industry-leading retail store productivity. This ensures that the company remains financially strong and efficient.

Outlook: Positive

A positive outlook for the company's credit profile is anticipated due to the following factors:

1. Improved Business Profile: The company is poised for an enhanced business profile, primarily driven by a steady expansion of its stores. This expansion is expected to boost revenues and maintain a healthy level of operating profitability.

2. Superior Debt Metrics: The company is projected to maintain superior debt metrics, supported by robust annual cash generation and a high degree of financial flexibility. These factors contribute to the company's strong financial position.

3. Sustainable Organic Growth: The company is on track to achieve sustainable organic growth. This focus on organic expansion and development is a positive indicator of its long-term financial stability and success.

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About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.


Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
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