Shares of retail giant Avenue Supermarts, the operator of the DMart retail chain, were in the red on July 14, after the consumer player posted a nearly flat net profit for the June quarter of FY26, as rising competition and margin pressures offset strong revenue growth.
While the retailer benefited from favourable pricing in staples and non-food categories, increased intensity in the FMCG space, especially from quick commerce rivals, weighed on profitability.
DMart's net profit stood at Rs 773 crore, down 0.1 percent from Rs 774 crore in the year-ago period. The muted bottom-line performance came despite a 16.3 percent year-on-year increase in revenue, which rose to Rs 16,359.7 crore from Rs 14,069 crore in Q1FY25.
Consolidated operating profit, as measured by EBITDA, rose 6.4 percent to Rs 1,299 crore compared to Rs 1,221.2 crore a year earlier. However, EBITDA margin slipped to 7.94 percent from 8.68 percent in the same period last year.
At 9.20 a.m., shares of the retail firm were quoting Rs 4,012.5, lower by 1.3 percent on the NSE.
Should you buy, sell, or hold DMart shares?
Domestic brokerage Motilal Oswal said, "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 growth and margins for DMart in the interim. However, we
believe DMart’s superior store economics would ensure its competitiveness and relevance to customers over the longer term." It maintained its 'buy' call, but cut its target price from Rs 4,800 to Rs 4,500.
DMart continues to navigate a challenging competitive landscape, courtesy QC players. Going ahead, HDFC Securities believes that store addition pace and margin improvement will be the key monitorables. The brokerage reiterated its 'add' rating, with a price target of Rs 4,000 per share.
"We estimate margin pressure shall continue given the sustained competition within the FMCG space. Opex increased due to a surge in wages of entry-level positions due to demand-supply mismatch of skilled workforce, service improvements and future investments," said Nuvama Institutional Equities. The brokerage trimmed its target price to Rs 4,086, donw from Rs 4,273 earlier, while reaffirming its 'hold' call.
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