DMart posts weak Q4 show, shares fall 1%; should you buy, sell, or hold?

Avenue Supermarts Ltd posted a disappointing margin performance in Q4FY25.

DMart operator Avenue Supermart Ltd.'s earnings show disappointed the Street, posting weaker-than-expected results. The retail operator's result fourth fiscal quarter caused brokerages to cut their target prices on the Nifty 50 counter.

Avenue Supermarts reported a 2.2 percent fall in standalone net profit at Rs 551 crore for the fourth quarter ended March 2025. The total revenue for the quarter stood at Rs 14,872 crore, as compared to Rs 12,727 crore in the same period last year.

Avenue Supermarts pointed to increased operating expenditure, due to a surge in wages of entry-level positions due to demand-supply mismatch of skilled workforce, service improvements and future investments. This caused pressure on margins during the quarter.

As a result, the value retailer's EBITDA margin moderated sharply, slipping to the 6.8 percent mark, which came as a negative surprise. Further, going ahead, the management expects that the margin pressure is likely to continue.

DMart opened 28 stores during the quarter ended March, which makes the total store count 415, which is the highest-ever store addition in a single quarter. DMart has added 50 stores this year, which is roughly 22 percent higher store addition versus last year.

The overall business remains resilient in metros. However, non-metro towns are doing significantly better. Further, the like-for-like growth in metro towns with lesser DMart store density has been relatively better.

At 9.17 am, shares of the supermart chain were quoting Rs 3,969.1, lower by 2.2 percent on the NSE.

International brokerage Jefferies maintained its 'hold' rating, with a reduced target price of Rs 4,100 per share, down from Rs 4,225 apiece. The broking house was disappointed in DMart's subdued margin performance.

"With the entry of large offline/online retailers into Quick-Commerce (QC), we expect pricing competition to remain intense over the near term, which could weigh on both growth as well as margins for DMart in the interim," said Motilal Oswal. "However, we believe DMART’s superior store economics would ensure its competitiveness and relevance to customers over the longer term."

The brokerage reiterated its 'buy' call, but cut its target price on shares to Rs 4,350, compared to Rs 4,650 earlier.

HDFC Securities said Avenue Supermarts maintaining its value proposition, improving assortment mix while maintaining operational efficiency will be key. The broking house cut its target price on DMart shares as well, with a target of Rs 3,850, down from Rs 3,950 per share.