DMart Q1 results: Higher costs, slower mature-store growth weigh on margins

Avenue Supermarts Ltd., which operates retail chain DMart, kicked off the first quarter of FY27 on a subdued note as slowing sales at its mature stores and higher operating costs weighed on profitability despite steady revenue growth and continued store expansion.

Consolidated revenue rose 14.9% year-on-year to ₹18,794.5 crore in the June quarter, but a similar increase in total expenses to ₹17,637.2 crore from ₹15,321.7 crore a year earlier limited profit growth, with consolidated net profit rising 11.3% to ₹860.4 crore. Higher employee costs, finance expenses and other operating costs continued to weigh on profitability during the quarter.

"Two years and older DMart stores grew by 5.5% during Q1 FY27 as compared to 7.1% in Q1 FY26," said Anshul Asawa, managing director and chief executive, who took over from Ignatius Navil Noronha earlier this year as part of the company's planned leadership transition.

He said growth in older stores across large metropolitan markets, which generate significantly higher revenue per square foot, remained flat during the quarter, while stores in non-metros continued to perform well.

This comes at a time when DMart is facing increasing competitive pressure in India's largest cities, as quick commerce platforms such as Blinkit, Swiggy Instamart, and Zepto capture a larger share of consumers' everyday spending. Although DMart continues to attract shoppers with its everyday-low-prices strategy, the convenience of 10-minute deliveries has intensified competition for urban wallets, especially in groceries and household essentials. This shift is starting to affect growth at the retailer's established metro stores, even as newer stores in smaller cities continue to perform well. DMart added three stores during the quarter, taking its network to 503 stores across India.

Sales continued to be dominated by food and grocery products, which contributed 54.9% of total revenue in the June quarter, down from 55.6% a year earlier. General merchandise and apparel, the retailer's higher-margin discretionary segment, accounted for 25.5% of revenue, up from 24.7% in the year-ago quarter, while non-food FMCG products contributed 19.6%, broadly unchanged from 19.7% a year earlier. The relatively stable product mix suggests the company did not see any meaningful shift towards higher-margin categories despite a slight uptick in discretionary sales, with food and grocery continuing to account for more than half of revenue.

‘Growth story intact’

Analysts said the results indicate that DMart's long-term growth story remains intact despite softer demand in urban markets. "Growth in mature stores has moderated as large metro markets remain subdued, but the company's aggressive store rollout into tier-II and tier-III markets continues to support overall revenue growth," said Vincent K.A., senior research analyst at Geojit Financial Services. In an analyst note dated 28 June, he said the retailer's physical-store expansion remains its biggest competitive advantage against quick commerce, while the rationalisation of DMart Ready reflects a sharper focus on profitability and execution.

He said DMart's continued store expansion, stabilising consumer demand and volume-led growth to support earnings over the medium term, although the faster pace of store additions could temporarily increase inventory levels and debt.

The Mumbai-based retailer has continued to reshape its leadership team under managing director and chief executive Officer Anshul Asawa. Lalit Ahuja, who previously served as executive vice president for operations, has been promoted to chief operating officer, effective 13 July.

Bhaskaran N, who was appointed whole-time director and chief operating officer in the previous quarter, has now been reappointed to the board in the same role. Parvez Vandrewala, currently executive vice president for operations, will move into the newly established role of ‘head of the centre of excellence’ from November.

The appointments mark the second consecutive quarter of senior leadership changes since Asawa took over in January, signalling a broader management realignment as the retailer prepares for its next phase of growth amid stiffer competition.