Avenue Supermarts shares drop over 4% after ‘soft’ earnings in Q1 FY27; key points raised by analysts

Shares of Avenue Supermarts, doing business as DMart, the retail corporation that operates a chain of supermarkets and hypermarkets, slipped as much as 4.24% in the opening deals to ₹3,908 apiece on the NSE on Monday, July 13, after the company posted ‘soft numbers’ for the quarter ended June 30, 2026 (Q1 FY27).

The company on Saturday posted an 11.33% increase in its consolidated net profit to ₹860.44 crore for the June quarter of FY2026-27 (Q1 FY27).

The company had posted a net profit of ₹772.81 crore in the April-June quarter a year ago, according to a regulatory filing from Avenue Supermarts.

Its revenue from operations was up 14.9% to ₹18,794.53 crore during the quarter under review. It was at ₹16,359.70 crore in the corresponding quarter of the last fiscal.

“PAT margin stood at 4.6% in Q1FY27 as compared to 4.7% in Q1FY26,” the company said in its earnings statement on Saturday evening.

Other key metrics

Total expenses of Avenue Supermarts in the June quarter were up 15.11% to ₹17,637.17 crore. Its total income, which includes other income, was ₹18,820.31 crore, up 14.9% in the June quarter.

Management Speak

Commenting on the performance of the Brick and Mortar business, Managing Director & CEO, Anshul Asawa, said two-year-and-older DMart stores grew by 5.5% during Q1 FY27 as compared to 7.1% in Q1 FY26.

“In large metros, growth in older stores, which have significantly higher revenue per square foot, was flat this quarter. While stores in non-metros continue to grow well,” he said.

During the quarter, it added three new stores, taking the total store count to 503.

Over its online platform DMart Ready, Avenue E-Commerce CEO Vikram Dasu said that during the quarter, it discontinued its operations in seven cities, which were marginal contributors. As of June 30, 2026, DMart Ready operates in 11 cities.

Promoted by Radhakishan Damani and his family, DMart retails basic home and personal products across markets including Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab, and Rajasthan.

What leading analysts say

Analysts remain cautious on Avenue Supermarts after Q1 FY27 results, with the key concern being a slowdown in same-store sales growth, especially in metro markets.

Goldman Sachs said Avenue Supermarts’ Q1 FY27 revenue growth slowed despite large store additions at the end of Q4 FY26 and higher FMCG inflation. The investment firm noted that same-store sales growth remained flat YoY in metro markets, likely due to increasing competition from quick commerce players. It added that DMart Ready is now focusing only on large cities.

EBITDA margins remained broadly flat YoY, as higher operating costs offset gross margin expansion.

PBT growth at 11.9% YoY lagged EBITDA growth due to an increase in depreciation and interest costs, which may include lease rentals.

JPMorgan said Q1 EBITDA margin was stable, improving 10 basis points YoY, supported by gross margin expansion of 50 basis points, aided by a higher contribution from General Merchandise and Apparel.

However, like-for-like growth of 5.5% was a key negative, despite rising inflation. The investment firm highlighted that older stores in large metro cities reported weak and flat growth, indicating a higher-than-anticipated impact from quick commerce competition.

Non-metro stores continued to perform better, supporting DMart’s focus on expanding in these markets.

During the quarter, DMart added three new stores, with two in non-metros, taking the overall store count to 503. Given the weak LFL growth and stable margins, JPMorgan expects the stock performance to remain subdued.

CITI said same-store sales growth moderated to 5.5% in Q1 FY27 compared with 10.8%, 5.6%, 6.8% and 7.1% in the previous four quarters, leading to revenue and EPS growth of 15% and 13% YoY, respectively, which were 4% and 9% below its estimates.

The leading investment firm highlighted that management indicated flat same-store growth for older stores in large metro cities, while non-metro stores continued to perform well.

CITI believes this was predominantly driven by quick commerce competition and partly due to the reversal of pantry stocking seen in Q4. DMart Ready discontinued operations in seven cities and is now present in 11 cities, resulting in subsidiary revenue growth slowing to 5% YoY compared with 16-20% growth in the previous four quarters, while losses increased 32% YoY to ₹75.3 crore.

CITI also noted that profit growth has lagged revenue growth in 10 of the last 13 quarters due to quick commerce competition, lower other income and higher interest expenses. The investment firm has cut its FY27-29 revenue estimates by 4-6% and EPS estimates by 5-7%.

Jefferies said Q1 performance appears better than the headline numbers suggest, as Q4 saw pre-buying that pulled forward demand, making Q1 same-store sales growth appear weaker. However, the investment firm flagged concerns around management’s commentary that older and high-throughput metro stores remained flat YoY, with some impact potentially coming from quick commerce competition.

It noted that gross margin improved to a multi-quarter high, but over 30% growth in staff costs limited YoY EBITDA margin expansion. Jefferies also highlighted that DMart Ready exited seven more cities during the quarter and is now present in 11 cities, compared with a peak presence of 25 cities.