Shares of Avenue Supermarts Ltd, the operator of the popular DMart retail chain, witnessed a sharp sell-off on Monday, January 05, tumbling 2.25% to hit a ten-month low of ₹3,635 per share. The decline deepened following the company's quarterly business update, which revealed revenue growth that fell short of market expectations.
Q3 Performance: Revenue Growth Slows Down
In a regulatory filing submitted on Friday, the Radhakishan Damani-owned company reported standalone revenue from operations of ₹17,612.62 crore for the December quarter (Q3FY26). This marks a year-on-year increase of 13.15% from the ₹15,565.23 crore recorded in the same quarter of the previous fiscal year.
However, this top-line figure presented a deceleration in growth momentum. It was lower compared to the 16% and 15% YoY growth posted in the first two quarters of FY26. More critically, it missed analyst estimates, which had pegged revenue growth around 17%. Brokerages including JM Financial and Motilal Oswal had projected a 17% growth figure.
Store Expansion and Operational Metrics
The company's store addition pace also disappointed the street. During the quarter, DMart added 10 new stores, taking its total count to 442. This figure fell significantly short of JM Financial's projection of 20 new store openings for the quarter.
Analysis by JM Financial highlighted other concerning operational trends:
- Sales per square foot remained flat year-on-year at ₹9.73k/sq. ft., which is 3% lower than pre-pandemic Q3FY20 levels of ₹10k/sq. ft.
- The brokerage estimated a same-store sales growth (SSSG) of only 4% for the quarter.
Brokerages Flag Margin Pressure and Revised Outlook
Leading brokerages have expressed caution following the update, pointing to slowing growth and persistent margin pressures. Motilal Oswal noted that while DMart's gross margin had stabilised in the second quarter, the weak revenue print and increased discounting by quick-commerce players like Blinkit and JioMart are expected to keep margins under pressure in the medium term.
JM Financial expects the gross margin to remain flat but forecasts a 40-basis point dip year-on-year to 7.5% in Q3FY26, largely due to negative operating leverage. Their calculations suggest EBITDA per square foot will decline by 5% YoY to ₹734.
"We expect PAT to grow 3% YoY to ₹8.1 billion, lower than EBITDA growth largely on account of higher depreciation expenses and lower other income," stated JM Financial in its analysis. The brokerage projects an 8% YoY growth in EBITDA to ₹13.3 billion.
Looking ahead, brokerages believe an acceleration in store additions is the key growth driver for DMart. Motilal Oswal projects 60 net store additions in FY26, up from 50 in FY25. The market will be closely watching the company's ability to execute this expansion plan amidst a challenging competitive landscape.
