Avenue Supermarts Ltd, which runs the popular retail chain DMart, kicked off FY26 with a mixed set of numbers. While revenue growth remained healthy, thanks to aggressive store expansion, profit margins contracted due to high operating costs and pricing pressure in the FMCG segment—causing net profit to fall short of analyst expectations.
Revenue rises in line with estimates
DMart reported standalone revenue of Rs 15,932 crore for Q1FY26, up 16 per cent from Rs 13,944 crore in Q1FY25. This was within the Street’s forecast range of Rs 15,932–16,348 crore. The retailer opened nine new stores during the quarter, taking its total store count to 424. Same-store sales remained steady, with sales per square foot expected at Rs 9,200—marking a 2 per cent YoY improvement.
PAT below estimates despite operational gains
The company’s standalone profit after tax (PAT) stood at Rs 830 crore, up a marginal 2 per cent YoY from Rs 812 crore. This missed the more optimistic expectations from HSBC (Rs 892 crore) and JM Financial (Rs 869 crore). The reported PAT was, however, in line with Axis Securities’ conservative estimate of Rs 817 crore. On a sequential basis, profit growth was robust, aided by improved operating leverage and festive pre-stocking.
Margin pressure continues
Standalone EBITDA came in at Rs 1,313 crore, up from Rs 1,221 crore YoY, registering a 7.5 per cent rise. However, the EBITDA margin slipped to 8.2 per cent from 8.9 per cent in Q1FY25. On a consolidated basis, the margin dropped further to 7.9 per cent, reflecting the impact of higher operational expenses, increased entry-level wages, and compressed gross margins due to fierce price wars in FMCG.
The company noted that deflation in staples and non-food items shaved off 100–150 bps from sales growth. In addition, competition intensified in both urban and tier-2 markets.
Stock reaction
Shares of DMart closed 2 per cent lower on Friday at Rs 4,069 on the NSE, reflecting investor concerns over the company’s narrowing profitability despite steady topline performance.
