Shares of this large-cap supermarket chain focused on value retailing are in the spotlight after the company released its Q2 sales updates amid increasing quick commerce competition.
Price Movement
In Friday’s trading session, Avenue Supermart Ltd (DMart) saw its share price hit an intra-day low of Rs.4,703.00, down from the previous close of Rs.4,942.60, representing a decline of approximately 5 percent. The shares have since recovered and are currently trading at Rs.4,789.85.
Rationale for the fall
Avenue Supermarts Ltd. is facing the pressures of increasing quick commerce competition while also dealing with a slowdown in growth and new store openings. In its second-quarter update released on Thursday, the operator of DMart reported a significant decline in same-store sales growth, which did not meet the expectations set before the second quarter.
The company reported a revenue of Rs.14,050.32 crore for the second quarter of the financial year 2025, an increase from Rs.12,307.72 crore in the same quarter last year, but a decline from Rs.14,069 crore in the previous quarter. Additionally, it added six new stores, bringing its total to 377.
Management Outlook
Management has raised concerns about the slow pace of store openings, citing regulatory delays rather than internal issues. Only 21 new stores were added in a recent year, below expectations, with management stating that timely permissions could have enabled more.
Meanwhile, the e-commerce initiative, DMart Ready, struggles with profitability, as stores receiving fewer than 10 orders per day are projected to operate at a negative EBITDA margin, indicating potential sustainability issues.
Brokerage Views
Brokerages have identified increased competition from quick commerce players like Blinkit, Zepto, and Instamart as a significant factor behind Avenue Supermarts’ sluggish growth. The swift expansion of grocery quick commerce in major cities has led to a shift in consumer preference towards convenience, impacting Avenue’s same-store sales growth.
Furthermore, a slowdown in store additions and weaker growth projections indicate a more challenging operating environment ahead.
Goldman Sachs has maintained a ‘sell’ rating for Avenue Supermarts Ltd, setting a target price of Rs.4,050 per share, suggesting a 16 percent downside.
The brokerage cited slower store additions and a sharp decline in same-store sales growth, attributing these challenges to the rise of quick commerce competitors in urban markets. Goldman Sachs also cut its FY25–27 estimates by 2 percent.
In contrast, Bernstein has kept an ‘outperform’ rating for Avenue Supermarts Ltd, with a target price of Rs.6,300 per share, suggesting a 32 percent upside. Although D-Mart’s standalone revenue has consistently missed estimates, its consolidated revenue surpassed expectations, driven by an impressive 82 percent compound annual growth rate of DMart Ready.
Financial Performance
In its recent financial results for the quarter ending June 2024, Avenue Supermarts Ltd reported a net profit of Rs.774 crore, marking a 17 percent increase from Rs.659 crore in Q1 FY24. The company’s return on capital employed (ROCE) is 19.4 percent, while its return on equity (ROE) stands at 14.5 percent.
About the company
Avenue Supermarts Limited, known for its DMart brand, is a leading Indian supermarket chain that focuses on value retailing. It offers a diverse range of products, including groceries, personal care items, and household goods.
Written by – Siddesh S Raskar
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