Avenue Supermarts Q1FY27: stock falls as growth slows

What triggered the fall in DMart shares

Avenue Supermarts Ltd., which operates the DMart retail chain, saw its share price slide in early trade on Friday after it released a softer-than-expected business update for the June 2026 quarter (Q1FY27). The stock fell more than 4% as investors reacted to moderation in revenue growth and a slower pace of store additions. On the BSE, the shares dropped as much as 4.86% to ₹3,984.20. At 10:10 AM, the stock was trading 4.13% lower at ₹4,014.85.

The decline came after Thursday’s session, when the stock ended 3.3% lower at ₹4,184. Over the past two trading days, the stock slipped about 8%, reflecting a sharper near-term reset after the update.

Q1FY27 revenue update: what the company reported

In its exchange filing, Avenue Supermarts said standalone revenue from operations rose 15.1% year-on-year to ₹18,343.49 crore in Q1FY27. Some brokerages flagged that the revenue growth came in below their expectations, especially given the company’s recent store expansion and a supportive inflation backdrop for FMCG products.

Motilal Oswal Financial Services said the reported revenue growth was weaker than both its earlier estimate of 19% year-on-year and pre-quarter expectations of 17% to 18%. The brokerage also highlighted that the company had opened a large number of stores in March 2026, which raised expectations for a stronger June quarter.

Store additions slowed to three in the quarter

Analysts linked part of the softer growth momentum to slower store additions. DMart added a net three stores during the June 2026 quarter. Some analysts compared this with a faster pace in the preceding period, noting that the March 2026 quarter saw a larger set of store openings.

The moderation in new store additions became a key factor in post-update commentary because DMart’s growth narrative has been closely tied to network expansion. Slower openings can influence near-term revenue trajectory, even if existing stores continue to perform steadily.

Margin and profitability: what the Street is watching

Brokerages broadly expect profitability to remain under pressure in the near term. Antique Stock Broking said profitability is expected to remain subdued due to elevated operating costs and weaker GM&A (general merchandise and apparel) performance. It added that aggressive upfront investments in new stores, along with elevated real estate costs, are expected to weigh on return on capital employed (ROCE).

Separately, market expectations referenced in commentary pointed to operating profit growth of about 15%, with operating profit around ₹1,516 crore. Margins were described as broadly flat, with expectations of EBITDA margin moving from about 8.2% to around 8.3%.

Morgan Stanley said margins will be the key monitorable when detailed earnings are announced, indicating that the June quarter update alone is not enough to conclude how operating costs and category mix played out.

Brokerages turn cautious: key calls and targets

The business update triggered mixed reactions across brokerages, with several remaining cautious on valuation and near-term growth momentum. HSBC maintained a ‘Reduce’ rating with a target price of ₹3,870, stating the quarter was weaker than expected and revenue missed both consensus and its own estimates. Macquarie retained an ‘Underperform’ rating with a target price of ₹3,100, pointing to disappointing sales growth and lower-than-expected store additions.

Goldman Sachs maintained a ‘Sell’ rating with a target price of ₹4,000, noting that revenue growth slowed despite a favourable inflation environment for FMCG products and recent store additions. Citi reiterated a ‘Sell’ rating with a target price of ₹3,650, flagging expensive valuations, risks to same-store sales growth (SSSG), and rising competition from quick-commerce platforms.

UBS remained relatively positive, retaining a ‘Buy’ rating with a target price of ₹5,500, but still termed the quarter “tepid” and warned that weaker-than-expected growth could pressure the stock.

Antique trims target, maintains Hold

Antique Stock Broking maintained a ‘Hold’ rating and reduced its target price to ₹4,437 from ₹4,524 earlier, based on 40x FY28 EV/EBITDA. The brokerage said near-term challenges including subdued performance in general merchandise and apparel margins, weak recovery in mature stores or SSSG, and rising competition intensity from online grocery formats in metros and Tier 1 cities could keep near-term performance in check.

Antique also cut its estimates by 3% and 2% for FY27 and FY28, respectively, to account for weaker-than-expected Q1FY27 performance. It expects sales and EBITDA CAGR of 17% each over FY26 to FY28.

Goldman’s “sell” view: what could change its stance

Goldman Sachs outlined what it sees as upside risks to its cautious view. These include faster-than-expected store expansion, successful scaling of DMart Ready to offset rising online competition, slower adoption of e-commerce in grocery retail, and a stronger recovery in discretionary spending by middle-income consumers.

This framing is important because it clarifies what variables the market is likely to track beyond quarterly revenue growth: expansion velocity, online execution, and the pace of customer shift to quick commerce.

Market context: competition and same-store sales focus

Multiple brokerages highlighted rising competitive intensity, particularly from online grocery and quick-commerce platforms in larger cities. In such an environment, investors typically focus more on same-store sales growth trends and gross margin resilience across categories such as general merchandise and apparel.

Macquarie said it believes same-store sales growth moderated from the levels seen in the March quarter. Citi also pointed to a “pantry-fill reversal” weighing on SSSG, along with ongoing margin risks.

Key facts at a glance

Street view and analyst coverage

According to Bloomberg data cited in brokerage coverage, 31 analysts track Avenue Supermarts. Among them, 10 have a ‘Buy’ rating, 12 recommend ‘Hold’, and nine maintain a ‘Sell’ rating. The stock has gained around 13% so far in 2026, even after the recent decline.

The dispersion in ratings reflects the push and pull between DMart’s long-term store-led growth model and near-term pressures from operating costs, store ramp-up investments, and intensifying competition.

What to watch when Q1FY27 results are announced

Avenue Supermarts is scheduled to announce its Q1FY27 financial results on July 11. Beyond revenue, market attention is likely to stay on operating costs, category-level performance in general merchandise and apparel, and margin trajectory.

The June quarter update has already reset some near-term expectations. The detailed results will determine whether the pressure points flagged by multiple brokerages are visible in reported margins and profitability, and how the company’s investment cycle is influencing returns.