DMart Q1: Speedbump or structural slowdown?

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Avenue Supermarts, which owns and operates supermarket chain DMart, is struggling to beat cut-throat competition from quick-commerce companies in metros. Standalone revenue rose 15.1% year-on-year to ₹18,340 crore in the June quarter (Q1FY27), and Ebitda increased 16.3% to ₹1,527 crore.

The Ebitda margin expanded by only 10 basis points (bps) to 8.3% despite a 50-bps expansion in the gross margin. An improved mix with a higher share of margin-accretive general merchandise and apparel category buoyed the gross margin.

But acceleration in employee expenses to support FY26’s back-ended store-addition contained operating margin expansion. That, along with higher depreciation and interest costs, led to a slower 12.8% growth in net profit to ₹936 crore.

Overall, growth is stalling as mature stores—those that have been operational for two years or more—in metro cities become less productive. Of the 85 stores added in FY26, 58 came up in Q4. This slowed down to just three stores in Q1, taking the total store count to 503.

But the store footprint was 19% higher year-on-year and drove growth even as like-for-like (LFL) growth in mature stores slowed down to 5.5% in Q1 from 10.8% in Q4. Bills cut—the number of receipts or invoices generated in a day—increased 13.4% year-on-year to ₹11 crore due to new stores added in Q4. Store productivity, as measured by bills cut per store, declined about 5%.

Elara Securities (India) is of the view that DMart’s historical pricing moat has weakened on aggressive quick commerce-led competition. Blinkit, Zepto and Swiggy Instamart have been joined by Amazon and Flipkart in the quick commerce race that is primarily concentrated in metro cities.

To be sure, DMart offers same-day delivery of online grocery orders through its subsidiary, DMart Ready. But the difference between consolidated and standalone results, which proxy DMart Ready’s performance, shows that growth has slowed to just 5.5% from a 20% growth profile earlier, Nuvama Research noted. It added that losses have widened to ₹75 crore in Q1 from ₹57/68 crore in Q1FY26/Q4.

The company has responded by cutting down its DMart Ready presence, while shifting focus towards quicker delivery. It exited seven cities during the quarter and is now present in only 11 cities. Compared to 40% of orders currently taking over 12 hours for delivery, the management is gunning for six-hour deliveries by FY27. Breakeven is expected over the next few years.

Non-metro stores have held up better. Elara estimates that metros account for about 60% of DMart’s revenue, implying encouraging 14-15% LFL growth in non-metros, while metro store sales remained flat. This can be due to low quick commerce presence, along with price-sensitive customer behaviour in non-metro cities.

But it leaves a significant expansion runway in non-metros for DMart, which can support growth even if quick-commerce competition continues to derail growth in metros.

Store expansion, a key growth lever, is expected to pick up pace. The board has approved raising about ₹1,000 crore through non-convertible debentures, which signals store additions in H2, according to Nuvama.

New stores are operating at about 55% of mature-store throughput, providing an important cushion to overall growth.

So far in CY26, the stock is up about 8% and continues to trade at 61 times estimated FY28 earnings, according to Bloomberg, leaving little room for disappointment. Unless metro growth stabilizes or store productivity improves meaningfully, valuations may continue to cap near-term upside.

Ananya Roy is the Founder of Credibull Capital, a SEBI-registered investment adviser, where she focuses on building disciplined, research-driven investment strategies for long-term wealth creation. A CFA charterholder with an MBA in Finance from a premier IIM and an engineering degree from NIT, she combines strong academic grounding w...