Avenue Supermarts is expanding into smaller towns after same-store sales growth dipped to 5.5% in the June quarter. While foot traffic remains strong, the company is consolidating its DMart Ready online operations to focus on large cities, while older metro stores face flat performance amid rising competition.
Avenue Supermarts, the operator of the DMart retail chain, is shifting its growth focus toward tier-2 and tier-3 cities. This strategic pivot follows a slowdown in same-store sales growth, which dropped to 5.5% in the June quarter compared to 7.1% during the same period last year. Company leadership noted that while stores in smaller towns are showing strong growth, older, high-revenue locations in major metropolitan areas are experiencing flat performance.
Cluster Strategy and Network Expansion
The company continues to rely on its established cluster-based expansion model, where it builds dense networks of supermarkets around centralized warehousing and distribution hubs. This approach is designed to keep operational costs low. While the firm is deepening its footprint in core states like Maharashtra, Gujarat, Telangana, and Karnataka, it is also selectively entering new regions such as Odisha, Haryana, Uttarakhand, and Goa. The primary challenge for the company is maintaining its 'everyday low price' business advantage while expanding into these new geographies without increasing debt or supply chain complexity.
Streamlining Online Operations
Avenue Supermarts has significantly scaled back its online venture, DMart Ready, to focus on improving profitability. The service has been discontinued in several cities, reducing its presence from 24 cities a year ago to 11 today. Management stated that the goal is to refine the online model specifically within large metro markets. This consolidation reflects a broader shift toward prioritizing capital efficiency over rapid geographic scaling in the online segment.
Competitive Pressure and Consumer Trends
The retail sector is currently facing pressure from quick-commerce platforms like Blinkit, Zepto, and Swiggy Instamart. These services are capturing a share of convenience-driven grocery shopping, particularly in urban areas. While DMart reported a 13.4% year-on-year increase in total bill cuts to 110 million, indicating that customer foot traffic remains healthy, the annualized revenue per square foot saw a marginal decline of 2.4% to ₹8,571. This suggests that while customers are still visiting stores, their spending patterns are shifting.
Financial data shows a subtle change in the product mix, with the contribution of General Merchandise & Apparel rising to 25.5% from 24.7%, even as Foods remains the largest revenue contributor at 54.9%. Investors may continue to track whether this improvement in product mix can protect profit margins as the company navigates increased competition in urban centers and manages the cost of expanding into non-metro regions. The next major monitorables include the revenue contribution from newer stores and the impact of the consolidated DMart Ready model on overall company profitability.