DMart Q1 results: Higher costs, slower mature-store growth weigh on margins

Avenue Supermarts Ltd., which operates retail chain DMart, had a weak start to the first quarter of FY27 as sales at its mature stores slowed despite steady revenue growth and continued store expansion and higher operating costs put pressure on profitability.

Consolidated revenues increased by 14.9% year-on-year ₹18,794.5 crore in the June quarter, but there was a similar increase in total expenses ₹17,637.2 crore ₹While the profit increase was limited to 15,321.7 billion kr in the previous year, consolidated net profit increased by 11.3%. ₹860.4 crore. High employee costs, financing expenses and other operating costs continued to weigh on profitability during the quarter.

“DMart stores two years and older grew 5.5% in Q1FY27, compared to 7.1% in Q1FY26,” said Anshul Asawa, managing director and chief executive officer, who took over from Ignatius Navil Noronha earlier this year as part of the company’s planned leadership transition.

It said growth at legacy stores in major metro markets, which generate significantly higher revenue per square foot, remained steady during the quarter, while non-metropolitan stores continued to perform well.

This comes at a time when DMart is facing increasing competitive pressure in India’s largest cities as flash commerce platforms such as Blinkit, Swiggy Instamart and Zepto capture a larger share of consumers’ daily spending. Although DMart continues to attract shoppers with its daily low price strategy, the convenience of 10-minute delivery has intensified competition for urban wallets, especially on groceries and household goods. This shift is starting to impact growth in the retailer’s established metro stores, although new stores in smaller cities continue to perform well. DMart added three stores during the quarter, taking its network to 503 stores across India.

Sales continued to be dominated by food and grocery items, contributing 54.9% of total revenue in the June quarter; This rate was 55.6% compared to the previous year. General merchandise and apparel, the retailer’s high-margin discretionary segment, accounted for 25.5% of revenue, up 24.7% from the previous quarter; Non-food FMCG products contributed 19.6%, remaining largely unchanged from 19.7% in the previous year. Its relatively stable product mix suggests that while food and grocery continue to account for more than half of revenue, the company has not seen a meaningful shift toward higher-margin categories, despite a slight increase in discretionary sales.

‘The growth story is intact’

Analysts said the results show that DMart’s long-term growth story remains intact despite declining demand in urban markets. “Growth in mature stores has slowed as major metropolitan markets remain stagnant, but the retailer’s brick-and-mortar store expansion remains its biggest competitive advantage over flash merchandising, while DMart Ready’s rationalization reflects a sharper focus on profitability and execution,” Geojit Financial Services senior research analyst Vincent KA said in a June 28 analyst note.

He said DMart’s continued store expansion, stabilization of consumer demand and volume-led growth will support earnings in the medium term, but a faster pace of store additions could temporarily increase inventory levels and debt.

The Mumbai-based retailer has continued to reshape its leadership team under managing director and chief executive officer Anshul Asawa. Lalit Ahuja, who previously served as vice president of operations, was promoted to vice president of operations, effective July 13.

Bhaskaran N, who was appointed as full-time director and chief operating officer in the previous quarter, has now been reappointed to the board in the same role. Parvez Vandrewala, currently vice president of operations, will move into the newly established ‘head of center of excellence’ role from November.

The appointments mark the second consecutive quarter of senior leadership changes since Asawa took over in January and signal a broader management realignment as the retailer prepares for the next phase of growth amid tougher competition.