DMart’s rapid store growth fails to boost profits
Avenue Supermarts, the operator of the DMart supermarket chain, has expanded its store network by 19.6% to 21.4 million square feet in the year ending September, but sales per square foot rose only 0.6% to ₹8,741, signaling weak productivity gains despite aggressive growth. The retailer added 15 stores during the quarter and 18 in the first half, following 85 additions in FY26, with the productivity measures covering both established outlets and newer locations under different evaluation frameworks.
The company now operates 518 stores, up from 432 a year earlier. While revenue grew 17.8% year-over-year to ₹19,644 crore, earnings before interest, tax, depreciation, and amortization (EBITDA) rose just 14.7% to ₹1,393 crore, and net profit attributable to shareholders increased 8.5% to ₹743.57 crore. The drop in profitability comes despite a 4.5% quarterly revenue increase, though the sequential EBITDA decline of ₹106 crore and profit drop of ₹117 crore occurred even as the company generated approximately ₹849 crore in additional revenue.
Sales at stores open for at least 24 months grew 9.5% year-over-year, the strongest performance in three quarters—up from 6.8% in the same period last year. Customer transactions rose 14.4% to 11.1 crore, yet the overall sales-per-square-foot metric remains stagnant. The discrepancy suggests newer stores take time to reach full efficiency, though individual contributions are not disclosed. Like-for-like growth tracking established outlets contrasts with the broader network’s sales-per-square-foot metric, which includes all locations regardless of maturity.
Margins have also weakened. The EBITDA margin narrowed to 7.1% from 7.3% a year earlier and 8% in the previous quarter. Operating expenses rose due to wage inflation at entry-level roles, while inventory holding periods increased to 36.1 days from 33.9 days a year earlier, reflecting slower stock turnover. Standalone inventory rose nearly 25% to ₹7,018 crore, and statutory operating cash flow declined 57% to ₹599 crore in the first half, despite higher earnings. Supplier payable days remained unchanged at 6.8 days, indicating no shift in payment terms.
Debt levels have climbed sharply. Total debt, including lease liabilities, jumped nearly 80% to ₹4,079 crore, raising the debt-to-equity ratio to 0.15 from 0.09. The company’s e-commerce arm, DMart Ready, has also scaled back, reducing its presence from 19 cities to 11 in the first half of the fiscal year. The contraction aligns with a focus on operational efficiency in remaining markets, as Vikram Dasu, Whole Time Director and CEO of Avenue E-Commerce, emphasized.
Anshul Asawa, Managing Director and CEO of Avenue Supermarts, emphasized the company’s focus on value pricing, noting that inflation has driven up operating costs. He stated, “Two years and older DMart stores grew by 9.5 per cent during Q2 FY27 as compared to 6.8 per cent in Q2 FY26,” highlighting the stronger performance of established outlets. The gap between rapid store expansion and sluggish sales growth suggests the retailer must improve efficiency to sustain profitability. The challenge now is whether the network can mature quickly enough to offset rising expenses and debt.
