DMart shares plunge 39% to 52-week low; here’s why the stock is falling

Avenue Supermarts, the parent company of retail chain DMart, witnessed a sharp decline in its share price, plunging over 39% from its 52-week high of ₹5,484 on September 24, 2024, to a fresh 52-week low of ₹3,340 on Monday, March 3. The steep decline has significantly eroded the company’s market capitalisation, which has fallen from ₹3.5 lakh crore in September to ₹2.24 lakh crore.

The sell-off in DMart shares comes as part of an ongoing market correction, with investors reacting to expensive valuations and increasing competition from quick commerce players like Swiggy Instamart, Zepto and Zomato’s Blinkit, analysts said. At its peak, DMart was trading at a very expensive price-to-earnings (PE) multiple of 132 times. Even after the correction, the stock continues to trade at a relatively high PE multiple of 82 times, leading some analysts to believe that it still remains an overvalued stock.

Competitive challenges

DMart’s expansion plans remain ambitious, with aggressive store additions projected beyond its current pace. However, analysts caution that if the company fails to meet these targets, its financial performance could suffer further downside.

While the value retail segment, in which DMart operates, continues to grow, quick commerce players are increasingly capturing market share. Analysts warn that if quick commerce enterprises tweak their business models to compete directly with DMart, the heightened competition could further pressure its growth and profitability.

Challenges from Zudio

The company is facing stiff competition from Tata-owned Zudio, which offers a premium shopping experience to customers with the latest fashion trends at affordable prices. Zudio has been expanding its footprint across the country. In the December 2024 quarter, Zudio added 62 new stores taking the total store count to 635.

The company has a presence in 190 cities and has been growing steadily. The company’s store count has been expanding at a compounded annual growth rate (CAGR) of 61% since the third quarter of financial year 2021, the company said in a presentation.

Meanwhile, DMart has a total of 391 stores across the country.

December-quarter earnings

Avenue Supermarts’ revenue in the December quarter rose 17.5% to ₹15,565 crore from ₹13,247.33 crore in the same period last financial year. Its net profit rose 6.5% to ₹784.65 crore from ₹736.82 crore in the year-ago period.

Its operating profit margin, however, declined 53 basis points to 7.93% at the end of December quarter from 8.46% in the same quarter last year.

What lies ahead for the stock?

The company recently announced a major change in its leadership. Neville Noronha, the long-serving Managing Director and CEO, will step down in January 2026 after two decades of transformative leadership. In his place, Anshul Asawa has been appointed as his successor. Asawa, a seasoned executive with nearly 30 years of experience at Unilever and a strong background in digital and e-commerce, is expected to drive DMart’s business diversification and accelerate growth.

Meanwhile, DMart’s private labels offer a wide range of everyday essentials, from groceries and snacks to household cleaning supplies. These in-house products are designed to match the quality of leading brands while being 10-15% more affordable. As a core part of DMart’s business model, private labels have become a major revenue driver, strengthening the retailer’s competitive edge.

As per a report by CLSA private label business contributed 5% to the company’s business and it believes that the contribution could rise to 20-25% going ahead.