Reliance Retail Q2 Profit Falls 24.5% as Quick Commerce Spending Weighs

what happened

Reliance Retail Ventures reported, according to Moody's, that its net profit for the quarter ended September fell 24.5% year on year, to 2,619 crore. Revenue from operations rose 5.8%, to 80,220 crore. The company said profitability has been hit for a third straight quarter by planned spending on quick commerce, including dark stores, higher input costs absorbed to protect demand, and a festive season shift versus last year.

EBITDA before a one-time impairment of 108 crore from closing 7-Eleven stores was 6,228 crore, down 8.6%, with an EBITDA margin of 7.8%. Finance costs jumped 53.9%, to 905 crore, due to higher borrowing and interest rates. Gross revenue, adjusted for the demerger of the consumer brands business in December last year, rose 6.4%, to 91,716 crore.

The share of e-commerce in grocery and fashion sales grew, and transactions rose 7%. The retailer opened 303 stores during the quarter and cut a net 222 stores from the first quarter by closing unproductive outlets, leaving 19,947 stores as of September. Isha M Ambani said the new model is working and is funded by offline profits.

why it matters

For investors, margins are the key issue: higher spending on fast delivery and costlier financing weigh on the retail arm of parent Reliance Industries, even as management points to resilient demand.

market impact

Reliance Industries shares: weaker retail profit and higher interest costs pressure the stock

• ▼Reliance Industries shares pressure down — retail profit fell for a third straight quarter and finance costs rose 53.9%

tags

instruments