Margins Under Pressure: DMart’s Q1 Profit Stalls Despite Strong Revenue Growth

Image Source : Value Research

Avenue Supermarts Ltd, the operator of DMart, reported a nearly flat net profit for Q1 FY26, triggering a slide in its stock price. Despite a robust 16.2 percent yearonyear revenue growth, rising costs and competitive pressures weighed heavily on profitability.

Key Highlights

Consolidated net profit stood at Rs 773 crore, marginally down from Rs 774 crore in Q1 FY25
Revenue rose to Rs 16,360 crore, up from Rs 14,069 crore last year
EBITDA increased to Rs 1,299 crore, but EBITDA margin slipped to 7.9 percent from 8.7 percent

Cost and Margin Pressures

Gross margins declined due to price deflation in staples and nonfood categories
Operating expenses surged, driven by inflation in entrylevel wages and investments in service quality
Employee benefit expenses rose 30.3 percent to Rs 346.9 crore

Competitive Landscape

Quick commerce rivals like Zepto and BlinkIt intensified pricing pressure in the FMCG segment
Discretionary spending remained subdued, with general merchandise and apparel contributing just 24.7 percent to revenue

Expansion and Store Performance

DMart added 9 new stores, bringing the total to 424 as of June 30, 2025
Samestore sales growth slowed to 7.1 percent, down from 9.1 percent in Q1 FY25
Sales per square foot rose 1.5 percent yearonyear to Rs 8,779

Market Reaction

DMart shares fell 2.51 percent on the NSE, closing at Rs 4,064
Analysts flagged margin compression and slower growth as key concerns for upcoming quarters

Sources: Economic Times Retail, Business Standard, Moneycontrol, BusinessWorld, Mint, Livemint, BSE India