Avenue Supermarts reported a 15% revenue increase for the June quarter, though growth in metro area stores remains flat. The shift toward quick commerce platforms is pressuring the company's traditional large-basket retail model in urban markets. Investors are now evaluating the impact of this change on same-store sales and future profitability.
Avenue Supermarts, the operator of DMart stores, saw its revenue rise by 15 percent year-on-year in the June quarter. While the company improved its gross margins by 45 basis points through higher sales of general merchandise and apparel, these gains were largely offset by a 30 percent increase in employee expenses. This led to muted growth in its core operating profitability, known as EBITDA margins.
The most significant trend noted in the recent quarterly performance is the slowdown in mature markets. Same-store sales growth, which measures the performance of stores open for more than a year, dropped to 5.5 percent from 10.8 percent in the previous quarter. This indicates that customer traffic and spending at established urban outlets are facing increased pressure.
Impact of Quick Commerce on Retail Models
The Indian retail market is witnessing a rapid change as platforms like Blinkit, Zepto, and Swiggy Instamart gain popularity. These services have introduced a shift in consumer behavior, where shoppers prefer the convenience of instant delivery for small, frequent orders over the traditional large-basket, destination-shopping experience that DMart historically dominated. Analysts note that this transition is most visible in large metro cities, where quick commerce competition is at its peak.
In response to this changing environment, DMart has adjusted its online strategy. The company has reduced its DMart Ready footprint, which now operates in 11 cities compared to 25 cities previously. This suggests management is focusing on profitability and core store efficiency rather than chasing a broad geographic presence in the online segment. By concentrating on its physical store network, especially outside the largest metros, the company aims to protect its business advantage.
Diverging Views Among Market Analysts
Financial institutions have expressed varying outlooks following these results. Some brokerages remain optimistic about the company’s long-term business model. For instance, Motilal Oswal and Axis Securities continue to hold a positive view, banking on DMart’s efficient cost structure and store expansion plans to drive growth over the next several years. They forecast steady growth in revenue and profit through FY29 as the company adds more physical stores.
Conversely, other global firms have expressed caution. JPMorgan lowered its target price, citing the weaker-than-expected same-store sales growth. Goldman Sachs maintained a sell-oriented stance due to concerns over slowing revenue and rising operational costs. Citi has also revised its earnings estimates downward. Jefferies highlighted that the rise of quick commerce represents a structural challenge that the company must navigate to maintain its market share.
The primary monitorable for investors going forward will be whether the company can stabilize sales in its metro outlets and manage operating costs as it continues to expand its physical footprint.