Avenue Supermarts reported 15% revenue growth in the first quarter of fiscal 2027 as like-for-like sales growth slowed to 5.5%. While non-metro stores performed well, flat growth in large metropolitan markets and rising employee costs remain key areas for investors to track.
Avenue Supermarts, the operator of DMART stores, recorded a revenue growth of approximately 15% year-on-year for the first quarter of fiscal year 2027. This performance reflects a cooling trend in sales compared to previous periods. A critical metric for retail businesses, like-for-like (LFL) growth—which tracks sales from stores that have been open for more than a year—dipped to 5.5% in this quarter, down from 10.8% in the fourth quarter of fiscal 2026.
Diverging Trends in Store Performance
The company is seeing a clear divide in consumer demand based on geography. Management noted that revenue growth in established stores located in large metropolitan areas has remained flat. However, stores in non-metro locations continue to drive performance with stronger growth numbers. This trend suggests that while the company's value-based model remains popular, its reach into smaller cities is becoming a more important driver of its total revenue than its older, urban footprint.
Margin Dynamics and Cost Pressures
Profitability for the quarter aligned with market expectations. The company benefited from a gross margin expansion of about 45 basis points compared to the previous year. This improvement was supported by a higher contribution from General Merchandise and Apparel categories, which typically carry better profit margins than basic food items. Despite this, the company faced cost pressure in the form of employee expenses, which climbed 32% year-on-year. Investors may continue to monitor whether these rising operational costs could limit future profit growth.
Strategic Shifts in Expansion and E-commerce
Expansion remains central to the company’s long-term plan, though the pace of new store additions slowed to three locations during the quarter after an aggressive push in early 2026. Simultaneously, the company is refining its e-commerce business, DMart Ready. In an effort to improve focus and efficiency, the platform has exited seven cities that provided minimal revenue, narrowing its operations to 11 cities. This rationalization is part of an ongoing effort to ensure the e-commerce segment contributes more effectively to the company’s bottom line.
Looking ahead, the company’s financial trajectory will likely depend on its ability to sustain high-single-digit LFL growth and manage the balance between aggressive store expansion and operational costs. Market analysts anticipate a compound annual growth rate of 18% in consolidated revenue through 2029, but realization of these projections will depend on whether consumer demand in metro areas recovers and if the company can maintain margin expansion amidst rising costs.