DMart Q2 Preview: Margin Squeeze Likely On Weaker Sales And Higher Expenses

DMart operator Avenue Supermarts Ltd. is set to announce its financial results for the July-September 2025 quarter on Saturday. The second-quarter performance is expected to reflect subdued growth as brokerages point to margin pressures, slower sales momentum and the impact of rising competition from quick commerce players.

Analysts noted that heavy rains, goods and services tax-related disruptions and higher costs have weighed on store productivity and same-store sales growth. While store additions continued, overall sales per square foot and margins are likely to remain below recent trends, with general merchandise and apparel segments showing weakness.

Despite steady expansion in its retail network, brokerages expect a moderation in profitability as operating expenses rise, and revenue momentum softens.

As per Bloomberg estimates, DMart’s consolidated revenue for the March quarter is expected to rise 15% year-on-year to Rs 16,617.85 crore, compared to Rs 14,444.5 crore a year ago.

Ebitda is likely to rise 14% to Rs 1,246.48 crore from Rs 1,093.77 crore, while margin is expected to contract to 7.5% from 7.6% a year ago. Net profit is seen falling to Rs 650.33 crore for the quarter from Rs 659.58 crore.

• Revenue seen 15% higher at Rs 16,617.85 crore versus Rs 14,444.5 crore.

• Ebitda seen 14% higher at Rs 1,246.48 crore versus Rs 1,093.77 crore.

• Margin seen at 7.5% versus 7.6%.

• Profit falls 1.4% to Rs 650.33 crore versus Rs 659.58 crore.

Here is what analysts are expecting from DMart in its Q2 results:

Jefferies | Rating: Hold | Target Price: Rs 4,301.50

• DMart's revenue growth moderated sequentially to 15.4% year-on-year, as reported in the Q2 business update.

• Growth is led by 14% growth in store base.

• Margins to decline year-on-year mainly due to negative operating leverage, as per the brokerage.

• The company opened eight new stores in the second quarter, taking the total store count to 432. This was in line with the brokerage's expectation.

JP Morgan | Rating: Buy | Target Price: Rs 4,950

• DMart, during the quarter under review, registered a slight moderation in revenue growth to 15% in comparison to 16% in the first quarter.

• While the store addition pace remained steady with eight in the second quarter and 17 in the first half of this fiscal, the company has focused on expanding its footprint in non-metro towns.

Nuvama

• DMart is likely to report a gross margin of 14.1% with a negative bias assuming stable general merchandise and apparel mix, according to Nuvama.

• However, the brokerage expects increasing competition including growing quick commerce segment to have a negative impact.

Axis Capital | Rating: Buy | Target Price: Rs 4,950

• The brokerage said that the supermarket chain operator saw a sharp miss on estimates in its Q2 business update as the mid-teen revenue growth was sharply below estimated and weaker in comparison to the previous quarter.

• Out drag from online grocery formats on store productivity in large metro DMart stores is well below the initial estimates of high-teen growth and weaker than the previous quarter.

• The brokerage believe excessive rains and likely GST-led disruption may have impacted growth in Q2.

• Sales per sq. ft grew nearly 1% year-on-year, this was below recent quarterly trends of 2-3% year-on-year growth and below Axis Capital's initial estimates of 4% growth at Rs 9,122 per sq. ft, it added.

• The brokerage had estimated acceleration in sales per sq. ft growth due to low base.

• Overall revenue growth of 15% in the second quarter was driven by 14% year-on-year expansion in network space and 6.5% same-store sales growth, it said.

• The brokerage estimates 9% Ebitda growth, which is lower than its initial estimate of mid-teen growth.

JM Financial | Rating: Reduce | Target Price: Rs 4,000

• Sales per sq. ft. is expected to grow 1% year-on-year to Rs 36,400 annualised, it said.

• The brokage expects Ebitda margin to contract by 30 basis points despite expectation of flat gross margin.

• It expects employee and other expenses to remain elevated due to higher competitive activity.

• The brokerage expects general merchandise to grow at 14.7%, a decline of 20 basis points year-on-year and sees Ebitda margin at 7.1%.

• The Ebitda margin compression of 50 bps is driven by lower general merchandise, higher wage costs and other expenses.