DMart sees muted profit in Q2 even as growth returns to older stores
Avenue Supermarts Ltd, which operates the DMart retail chain, recorded a 15.4% year-on-year increase in consolidated net income. income ₹16,676.3 crore in the July-September quarter, driven by steady growth in its legacy stores and continued expansion in key cities.
Consolidated net profit slightly increased by 3.8% ₹684.85 crore in the second quarter of FY26 due to high employee and finance costs.
DMart’s personnel expenses increased by 32% annually ₹376.83 crore in the second quarter of FY26, reflecting an ongoing challenge for the retailer. Finance costs increased almost 2 times ₹34.96 crore during the quarter.
The Mumbai-based retailer added eight new stores in the July-September quarter, taking its total store count across India to 432.
The most important highlight of the quarter was the revival in the growth of old stores. “DMart stores two years and older grew 6.8% in Q26 compared to Q25,” said Anshul Asawa, chief executive officer (CEO) of the company.
“Following the government’s recent announcement on GST reforms, we have passed on the benefit of reduced GST rates to all our customers wherever possible,” he said.
Food and grocery items continued to dominate the retailer’s sales mix, contributing 57% of total revenue. General merchandise and ready-made clothing accounted for 19.7%, while non-food FMCG accounted for 20.2%.
While the company reiterated its commitment to its ‘everyday low cost’ model, it did not make any forward-looking statements regarding growth or adding stores.
E-commerce race
Meanwhile, the retailer discontinued operations of its e-commerce service DMart Ready in five cities – Amritsar, Belgavi, Bhilai, Chandigarh and Ghaziabad – during the quarter.
DMart Ready is DMart’s online grocery and essentials delivery platform. It allows customers to order products through its website or mobile app and have them delivered to their homes or picked up at designated DMart Ready delivery locations.
“We added 10 new fulfillment centers in our existing markets and continued to invest and deepen our presence in major metropolitan cities,” said Vikram Dasu, chief executive officer and CEO of Avenue E-Commerce.
DMart Ready’s growth depends on the proximity of its fulfillment centers, CEO Neville Noronha said in a post-earnings call with analysts on July 30. “We don’t have enough fulfillment centers. The closer we open fulfillment centers to delivery markets, the more we will grow.”
CEO candidate Anshul Asawa will take over from Noronha in January next year. Noronha, who has led DMart for more than a decade, has stated that he will maintain some involvement with the company after his term ends.
“…there is huge competition from flash trading. If you see Swiggy and Blinkit, which are new to flash trading, you will see that they are moving very fast,” said Pratik Prajapati, equity research analyst at Ambit Capital.
“In a place like this, it is not possible for this DMart Ready to come back like this because there are no fulfillment centers like Blinkit and Swiggy,” Prajapati said.
Prajapati added that the full impact of the GST rate cut, income tax benefit and festival procurement will be seen in the second half rather than the first half.
He said quarterly comparisons could be misleading due to the change in festival calendar (Navratri fell in October last year, but is in September this year) making second quarter results not directly comparable. While last year’s third quarter was extremely strong and the second quarter was relatively weak, this year’s performance may be mixed and can be evaluated on a full-year basis.
“We note that there are currently over 100 cities where one or more QC (quick trade) companies are present and no DMart stores are present, indicating that QC companies are rapidly expanding into tier 2/3 cities, thus causing more competition for Dmart,” according to a June 24 note by Kotak analysts.
Since the markets are closed today, investors’ reaction to the earnings will only be known when trading resumes on Monday.
