DMart Q1 Results Review: Brokerages Bearish On Intensifying Competition, Margin Pressures

Brokerage firms have largely expressed caution towards DMart operator Avenue Supermarts Ltd., primarily citing missed earnings expectations on both revenue and margins during the first quarter of fiscal 2026.

"Revenue growth impact of approximately 100-150 basis points was primarily due to high deflation in many staples and non-food products," Chief Executive Officer Neville Noronha said.

Gross margins are lower as compared to the same period in the previous year, due to continued competitive intensity within the FMCG space, he added. "Operating costs are higher due to efforts on improving service levels, capacity building and inflation at entry level wages."

DMart parent Avenue Supermarts Ltd.'s net profit was flat in the first quarter of financial year 2026, thereby missing the analysts' estimates by a significant margin.

The retailer's consolidated bottom line came in at Rs 772.81 crore during the quarter under review, down marginally by 0.1% as compared to Rs 773.68 crore in the year-ago period, according to an exchange filing on Friday.

• Revenue up 16.3% to Rs 16,359.7 crore versus Rs 14,069.14 crore (Bloomberg estimate: Rs 16,583 crore).

• Ebitda up 6% to Rs 1,299.04 crore versus Rs 1,221.25 crore (Bloomberg estimate: Rs 1,354 crore).

• Ebitda margin at 7.9% versus 8.7% (Bloomberg estimate: 8.2%).

• Net profit down 0.1% to Rs 772.81 crore versus Rs 77.68 crore (Bloomberg estimate: Rs 883 crore).

Macquarie

• Maintained 'underperform' rating with a target price of Rs 3,100, implying a downside of 23.7%.

• Ebitda below expectations given weaker gross margin and higher employee costs.

• High deflation of staples led to 100-150bps hit to Q1 sales growth.

• High competitive intensity in FMCG and slightly higher gross margin drag were concerning.

Morgan Stanley

• Maintained 'underweight', with revised target price of Rs 3,350, a potential downside of 18%.

• Earnings missed consensus expectations on both top line and margins.

• Company's slow response to market changes is starting to hurt its business.

• Sees risks to company's expectations of 20% top-line growth.

• Expects company to increase exposure to non-essential portfolio and e-commerce to revive growth.

• Current results and commentary adds to ongoing stock de-rating, according to the brokerage.

JPMorgan

• Maintained 'neutral' with a target price of Rs 4,150, an upside potential of 2.1%.

• Ebitda in line with consensus but marginally below forecast.

• Expects near-term margins to soften as DMart navigates increased competition in FMCG.

• Accelerated store additions and e-commerce capacity build-out favourably.

• Given no positive surprise on margin front, stock will likely stay range-bound

Kotak

• Q1 FY26 same store sales growth and margins were both under pressure.

• Proportion of low-margin foods category increased impacting gross margins.

• Margin decline driven by lower-than-expected gross margins and higher employee costs.

• Valuations remain punchy and hence the brokerage retained a 'sell' rating.

Nuvama

• Maintained 'neutral' and a target price of Rs 4,086, indicating a potential upside of 0.5%.

• Impressive 7.1% LFL growth despite major deflation in staples and non-food.

• Gross margin fell on shift in lower-margin food, capacity investments and rising entry-level wages

• Estimates pressure in margins to continue given competitive trends.

• Cut FY26E/27E PAT estimates by ~6%/8%.