The business linked the drop in gross margins to “ongoing competitive pressure” in the consumer goods sector
Due to increased operating expenses and growing competition from quick commerce rivals affecting margins, Avenue Supermarts, which operates the Dmart supermarket chain, reported a slight drop in profit for the first quarter of the current financial year (Q1FY26).
Consolidated net profit fell to Rs 773 crore (USD 90.12 million) in the quarter ending June, down from Rs 774 crore a year prior. Sales increased by 16 per cent during the quarter. Dmart’s profit margin after tax was 4.7 per cent in the first quarter of fiscal 2026, down from 5.5 per cent in the previous year.
The business linked the drop in gross margins to “ongoing competitive pressure” in the consumer goods sector. Dmart stated that operational expenses increased because of capacity development initiatives and rising wages.
Quick-commerce services like Zepto, Eternal’s BlinkIt, and Swiggy’s Instamart, which provide deliveries in as fast as ten minutes, are drawing in tech-oriented customers by subsidising delivery fees and providing discounts.
Analysts noted a decline in Dmart’s sales growth for the first quarter, revealed in a business update prior to results, warning of ongoing margin pressure as competitors, including e-commerce platforms, increase their market share.
Dmart reported that the standalone revenue from operations for the quarter ending 30 June 2025, reached Rs 15,932 crore, an increase of 16.2 per cent year-on-year (YoY) compared to Rs 13,712 crore reported in the same quarter last year.
The retail company noted that the overall store count as of 30 June 2025 was 424, which includes one location in Sanpada, Navi Mumbai, Maharashtra, presently closed to customers for renovations.
Global brokerage Morgan Stanley maintained its ‘underweight’ rating, setting a target price of Rs 3,260 per share. The firm’s independent revenue for Q4 increased by 16.2 per cent compared to the previous year, just shy of the projected growth of 17.4 per cent.
Dmart opened nine new stores in Q1FY26, an increase from six in Q1FY25, but much lower than the 28 added in Q4FY25. The total number of stores currently stands at 424, and the projected same-store sales growth (SSSG) for the quarter is estimated to be approximately 3 to 4 per cent.
The brokerage anticipateD the EBITDA margin for Q1 will be 7.8 per cent, a decrease from 8.7 per cent in Q1FY25.
Additionally, Macquarie upheld its underperform rating for Dmart, setting a target price of Rs 3,000 per share. The brokerage reported that Q1 sales growth slowed a bit relative to Q4, with a slight shortfall against projections.
Due to the advantageous product mix in the first quarter, which usually enhances gross margins, Macquarie anticipateD a sequential increase in both gross and EBITDA margins.
Conversely, CLSA maintained its ‘outperform’ rating, setting a target price of Rs 5,549 per share, despite the company’s Q1 standalone revenue being reported as 2 per cent lower than expected.
The store, established by billionaire investor Radhakishan Damani, also rivals physical supermarkets owned by Mukesh Ambani’s Reliance Industries and Vishal Mega Mart.
It employs an affordable pricing strategy by sourcing products at competitive rates and offering them at significantly reduced prices, attracting both cost-sensitive consumers and bulk purchasers.
