DMart Q1FY26: Revenue miss, margins under pressure

What changed this quarter for Avenue Supermarts

Avenue Supermarts Ltd., the operator of the DMart supermarket chain, reported a mixed June-quarter (Q1FY26) performance that fell short of Bloomberg consensus estimates on key lines including revenue, Ebitda and net profit, according to the information cited by multiple broker notes. Brokerages turned more cautious after the update, pointing to margin stress from competitive intensity, deflation in staples and higher operating costs. While revenue growth remained strong and store additions continued, analysts focused on near-term risks to like-for-like growth and profitability. The quarter also revived debate around how fast quick-commerce is reshaping grocery buying in urban markets.

Revenue growth stayed healthy, but estimates were missed

Reported revenue growth for Q1FY26 was about 16% year-on-year, but the reported absolute number varied across cited sources. One set of figures put quarterly revenue at ₹16,359.7 crore, up 16.3% YoY, versus a Bloomberg estimate of ₹16,583 crore. Another cited figure put April to June revenue at ₹15,932 crore, up 16.19% YoY, versus a Bloomberg-polled estimate of ₹16,579 crore. Regardless of the base, the common takeaway in brokerage commentary was that the quarter marked a rare miss versus consensus for India’s largest retailer by market capitalisation.

Same-store sales growth slowed as competition intensified

Same-store sales growth (SSSG), watched closely as a measure of core store productivity, eased to about 7% in the April to June period from over 8% in the prior quarter, based on the provided text. Morgan Stanley, in its note, estimated SSSG at around 3%-4%, reflecting a more conservative read on underlying momentum. Analysts linked the SSSG moderation to a tougher demand and pricing environment in large cities, where online and rapid-delivery formats are competing aggressively. The commentary also noted the risk that convenience could increasingly outweigh price as a purchase driver, challenging DMart’s traditional value proposition.

Deflation and pricing pressure hit growth and gross margins

Management flagged deflation as a material headwind to reported growth. Chief Executive Officer Neville Noronha said the revenue growth impact of approximately 100-150 basis points was primarily due to high deflation in staples and non-food products. The company also indicated gross margins were under pressure due to continued competitive intensity within FMCG. Brokerages highlighted a narrowing margin trajectory and an unfavourable shift in sales mix as near-term concerns.

Operating costs and quick commerce added to margin stress

Separate reporting linked profit pressure to rising operational expenses and increased competition from rapid-delivery services. Quick-commerce platforms such as Zepto, Blinkit and Swiggy Instamart were cited as attracting customers using discounts and subsidised delivery, with delivery windows as short as ten minutes. Analysts also noted that competition from gig work in quick commerce is making it tougher for traditional retailers to retain talent. This cost and competition mix has become central to the “wait and watch” stance across multiple brokerages.

Store additions continued, but the market wants stronger throughput

Store expansion remained a visible lever for topline growth. One broker note cited nine store additions in the quarter, described as in line with expectations. However, the focus shifted to revenue per store and like-for-like momentum, as investors assessed whether expansion alone can offset slower SSSG in urban catchments. JP Morgan’s commentary referenced revenue per store rising 2% YoY, while still pointing to quick-commerce risk for high-turnover urban stores.

Key reported numbers at a glance

Brokerage calls: cautious on valuation, margins, and urban competition

Brokerage reactions skewed cautious, with some maintaining bearish ratings and lowering targets. Macquarie kept an “underperform” rating with a target price of ₹3,100, implying 23.7% downside. Morgan Stanley maintained “underweight” with a revised target of ₹3,350, implying 18% downside, citing expensive valuations, heightened competition, and a view that the company’s response to market changes is starting to hurt.

Goldman Sachs reiterated a “sell” rating with a target price of ₹3,400, implying 22.6% downside, and highlighted softer-than-expected sales growth and heightened competitive pressure in urban markets. JP Morgan maintained a “neutral” rating and set a target price of ₹4,150, citing quick-commerce risk to high-turnover stores while also noting DMart’s competitive pricing versus online grocers. The compiled view referenced in the text indicated the stock is rated “hold” on average (LSEG-compiled), even as individual houses remain split.

Why the quarter matters for investors tracking modern retail

The quarter reinforced a key debate: DMart’s store-led model continues to deliver steady topline growth, but the margin and SSSG profile is becoming harder to defend as competition escalates. The cited notes repeatedly linked pressure to staples deflation, wage inflation, and an unfavourable sales mix, alongside aggressive pricing from quick commerce in urban India. Morgan Stanley also warned of risks to expectations of 20% top-line growth and suggested the company may need to increase exposure to non-essential categories and e-commerce to revive growth.

Conclusion

Avenue Supermarts delivered double-digit revenue growth in Q1FY26 and continued store additions, but the quarter fell short of consensus estimates and sharpened concerns around margins and same-store momentum. Brokerages largely shifted to a more cautious stance, citing competitive intensity, deflation headwinds, and operating cost pressures. The next set of updates on SSSG, gross margins, and any strategic response to quick-commerce pressure will remain central to how investors reassess valuations and near-term earnings expectations.