Net profit rose 8.5% YoY to Rs 743.5 crore, while revenue jumped 17.8% to Rs 19,644 crore.
EBITDA grew 15% to Rs 1,394 crore, but the margin fell to 7% from 7.3% a year earlier.
Like‑for‑like sales improved to 9.5% and the chain added 15 stores, taking the total to 518 outlets.
Brokerages are split: CLSA remains bullish with a Rs 5,723 target, while Citi stays bearish with a Rs 3,250 target.
Cash flow turned sharply negative, with free cash flow widening to Rs 1,640 crore and debt rising to Rs 2,630 crore.
💡 Why It Matters
DMart is one of India's largest discount retailers, and its performance influences the broader retail sector and market sentiment. While revenue growth signals strong consumer demand, the slowdown in profit margins raises concerns about cost pressures and competitive threats from online quick‑commerce platforms. Investors and analysts will monitor whether the chain can sustain its expansion without eroding earnings, especially as debt levels rise and cash flow turns negative.
Earnings snapshot Avenue Supermarts Ltd., the operator of the DMart discount‑store chain, reported its fiscal second‑quarter results for FY27 on Monday. Consolidated revenue climbed 17.8% year‑on‑year to **Rs 19,644 crore**, driven by robust consumer demand and the addition of 15 new outlets, bringing the total store count to **518**. Net profit rose **8.5%** to **Rs 743.5 crore**, and EBITDA increased **15%** to **Rs 1,394 crore**. However, profitability metrics slipped: the EBITDA margin fell to **7%** from **7.3%** a year earlier, and earnings per share missed consensus estimates by roughly 7%.
Store performance and cost pressures Like‑for‑like (LFL) sales improved to **9.5%**, up from 5.5% in the prior quarter, indicating that existing stores are generating higher sales. Yet, the company flagged several headwinds that eroded margins. Minimum‑wage hikes raised payroll costs, while a higher food‑mix and weaker gross margins squeezed profitability. EBITDA per store hit a multi‑quarter low, and revenue per square foot grew only **1.5%** YoY, suggesting that the additional floor space is not yet translating into proportionate earnings.
Broker reactions Analyst opinions diverged sharply: - **CLSA** kept an *Outperform* rating and set a **Rs 5,723** target, implying about **63% upside** from the current price, citing the solid LFL growth and a gross margin of **14.15%** as positives. - **Jefferies** retained a *Hold* stance but trimmed its target to **Rs 4,000**, pointing to wage inflation, inventory build‑up and declining store productivity. - **Motilal Oswal** stayed *Neutral* with a **Rs 3,925** target, acknowledging accelerating revenue growth but noting the 3% and 7% shortfalls in EBITDA and net profit respectively. - **Citi** maintained a *Sell* rating, cutting its target to **Rs 3,250** and highlighting persistent profitability pressure, quick‑commerce competition, and a widening negative free cash flow that expanded to **Rs 1,640 crore** in H1 FY27.
Market reaction The mixed earnings and profit‑margin concerns pushed DMart shares down **3%** in early trade, trading around **Rs 3,411**. The stock has slipped **5.4%** so far in 2026, underperforming the broader **Nifty 50**, which is down **13.9%** over the same period.
Outlook Going forward, DMart’s ability to convert its revenue momentum into sustainable profit growth will be under close watch. Cost‑control measures, especially around wage inflation and inventory management, will be critical. The firm’s exposure to quick‑commerce rivals could further pressure margins if not mitigated.
What to watch next - Quarterly updates on **EBITDA per store** and **gross margin** trends. - Management commentary on **cost‑containment initiatives** and **store‑productivity improvements**. - Progress on **debt reduction** and the trajectory of **free cash flow**. - Any strategic response to the **quick‑commerce** competition, such as partnerships or new delivery models. - Subsequent broker revisions to target prices as more data on profitability emerges.
🏛️ Background & Context
Avenue Supermarts has pursued an aggressive store‑expansion strategy, adding 15 outlets in Q2 FY27 to reach 518 stores nationwide. The Indian retail market is increasingly competitive, with e‑commerce players launching rapid‑delivery services that pressure traditional brick‑and‑mortar formats. Wage inflation, driven by recent minimum‑wage hikes, has become a notable cost factor for retailers across the country.
👁️ What To Watch Next
Key indicators to follow include the next quarter's EBITDA margin, free cash flow trends, and any announcements on cost‑control measures or strategic partnerships to counter quick‑commerce competition. Changes in broker target prices and rating upgrades or downgrades will also reflect evolving market expectations.
