Avenue Supermarts Q1 FY26: Revenue up 16%, margins slip

What DMart reported for Q1 FY26

Avenue Supermarts, the operator of DMart, reported a steady rise in sales for the quarter ended June 2025 (Q1 FY26). The company said its overall growth remained robust, but cost and margin headwinds affected profitability metrics. A key factor highlighted was deflation across several product categories, which reduced reported sales value even when volumes and footfalls held up. The results also came alongside continued store additions, taking the network to 424 stores at the end of the quarter. Investors tracked both the topline growth and margin commentary, with the stock reacting negatively after the announcement.

Standalone revenue and profit: growth continues

On a standalone basis, revenue from operations for Q1 FY26 rose 16.2% year-on-year to ₹15,932 crore, compared with ₹13,712 crore in the same quarter last year. Standalone net profit for the quarter was reported at ₹830 crore, up 2.1% from ₹812 crore a year earlier. The company’s profit growth was notably slower than revenue growth, reflecting the cost pressures discussed in the update. PAT margin for the quarter was 5.2%, down from 5.9% in Q1 FY25. Basic EPS came in at ₹12.75, up from ₹12.49 in the year-ago quarter.

EBITDA rises, but margin compresses

Standalone EBITDA for the quarter stood at ₹1,313 crore, compared with ₹1,221 crore in the year-ago period. While EBITDA increased year-on-year, the EBITDA margin declined to 8.20% from 8.90% in the same quarter last year. The company linked the margin pressure to a combination of pricing and cost factors. It pointed to deflation in staple food and non-food products as a key headwind during the quarter. According to the company, this price decline reduced sales growth by about 100 to 150 basis points.

What drove the margin pressure

The update flagged multiple drivers behind the weaker margin profile. One factor discussed was a change in category mix, where higher-margin segments such as non-food FMCG, general merchandise and apparel had lower contribution, while FMCG contribution increased. Competitive pressure was also cited as a factor weighing on gross margins. Separately, operating costs rose due to increased investment in store expansion and higher entry-level wages. The company also indicated higher spending on cost of service, adding to margin compression.

Store additions and footprint expansion

Avenue Supermarts opened 9 new stores during the quarter. Total store count stood at 424 as of end-June 2025. The company has been following a cluster-based expansion approach, focusing on opening stores near existing locations and distribution centres to improve supply chain efficiency and reduce operating costs. The operational update also mentioned a store addition in Agra, described as the company’s first major expansion in Uttar Pradesh since entering Ghaziabad. Store expansion remains a key operational lever, but it also increases near-term operating costs.

Consolidated numbers: topline up, profit lower

Alongside standalone performance, the company also reported unaudited consolidated financial results for the quarter ended 30 June 2025. Consolidated revenue from operations was ₹16,359.70 crore, up 16.3% year-on-year. Consolidated net profit declined 28.8% to ₹550.79 crore, compared with ₹773.68 crore in Q1 FY24. The Board of Directors approved the consolidated results at its meeting held on 11 July 2025.

Market reaction: stock lower after the update

Following the results announcement, Avenue Supermarts’ shares traded lower. At around 2:09 PM, the stock was down 1.09% at ₹4,020 on the NSE versus the previous close of ₹4,064.20. The stock also fell to an intraday low of ₹3,930 after the announcement. Separately, another update noted that shares declined 4% on July 3 after the Q1 FY26 business update came in below market expectations, despite the company reporting positive year-on-year growth.

Key performance snapshot (Q1 FY26)

Why the Q1 print matters for investors

The quarter underscored a key reality for value-led grocery and daily-need retail: even when footfalls and store expansion remain healthy, deflation and competitive pricing can dilute reported revenue growth and pressure margins. The company explicitly quantified the deflation impact at 100 to 150 basis points on sales growth. EBITDA margin moved down year-on-year, and PAT margin also fell, despite revenue rising at a mid-teens pace. Investors also focused on the cost outlook, including investments tied to store expansion and wage increases.

What to watch next

Near-term investor attention is likely to remain on margin movement, category mix, and the pace of store additions relative to costs. The company has stated that headwinds impacted cost and margins during the quarter, even as overall growth stayed robust. Any further management commentary on deflation, competitive intensity, and operating cost trajectory will be important as the year progresses. Investors will also track whether store expansion continues at similar levels, given that Q1 added nine stores and the total footprint reached 424 as of June 30, 2025.