Avenue Supermarts Q3 Review: DMart Rides Margin Tailwind, But Competitive Pressures Remain High

DMart parent Avenue Supermarts Ltd.'s December quarter earnings beat was driven almost entirely by a sharp margin surprise, even as growth continued to slow, note brokerages.

Goldman Sachs said Avenue Supermarts reported a 60 basis point year-on-year expansion in consolidated gross margin, the highest in several quarters, which drove profit before tax growth of 18% annually — far stronger than the 2% average PBT growth seen over the last five quarters. PBT came in 20% ahead of Goldman’s estimates. Revenue growth was already known from the quarterly update.

However, Goldman Sachs flagged the margin spike as largely one-off, attributing it to trade discounts from FMCG companies clearing pre-GST channel inventory. As a result, it does not see the gross margin expansion as sustainable.

Operating costs offered some relief, with opex per store growth moderating over the past three quarters after rising at double-digit rates from FY25 as DMart invested in store upgrades. Goldman raised FY26 EPS by 6% due to the margin spike and FY27–28 EPS by 2% on slightly lower store opex, but kept sales growth assumptions unchanged at 17% for FY27 and FY28 and maintained a 'sell' rating, citing sustained competitive intensity.

Jefferies echoed the view that margins, not growth, drove the earnings beat. Standalone Ebitda rose 20% to Rs 1,500 crore, with Ebitda margin expanding 50 bps, the highest in six quarters.

DMart added 10 stores in 3Q, taking the total to 442, but still has only one store in Uttar Pradesh, defying expectations of faster expansion there. DMart Ready remained in 19 cities, unchanged sequentially. On labour codes effective November 21, 2025, management said the impact on own employees is not material, with evaluation ongoing for contract labour.

Jefferies also highlighted a management transition, with Ignatius Navil Noronha stepping down as MD & CEO on January 31, 2026. Anshul Asawa will become CEO from February 1, 2026 and MD from April 1, as Jefferies retained its 'hold' rating.