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Avenue Supermarts' (DMart) stock declined following its Q4 FY26 earnings report, despite the company reporting strong revenue growth and improved operating margins. Revenue increased by 18.9% year-on-year to ₹17,683.9 crore, and EBITDA margins expanded to 6.85% from 6.42% a year earlier, exceeding market expectations. This operational performance was supported by a 10.8% rise in like-for-like (LFL) sales, the highest in over two years, signaling resilience in demand for DMart's existing stores.
However, the net profit for the quarter was ₹656.6 crore, a 19.2% increase from the previous year, but fell short of the consensus estimate of ₹680 crore. This profit miss, even with solid top-line and margin gains, led to investor caution. The stock fell over 3% on May 4th, trading around ₹4,434.3, although it remains up approximately 10.4% over the past year while the Nifty 50 has been flat. DMart also marked a milestone by reaching 500 stores during fiscal year 2026.
DMart operates in a competitive retail environment. Competitors like Reliance Retail reported an 11% revenue increase to ₹87,344 crore for Q4 FY26, with a marginal 0.5% profit growth and a 7.9% EBITDA margin. Tata Consumer Products had previously forecast revenues between ₹4,400–4,700 crore with EBITDA margins of 14–16%. Value retailers such as V-Mart and Trent have also shown strong revenue growth from store expansion and increasing same-store sales.
The company's valuation, with a P/E ratio often hovering around 100x, continues to be a significant concern for many analysts. Emkay Global Financial Services, for example, reiterated a 'Sell' rating with a ₹3,700 target price. They cite concerns over slow market expansion and the growing threat from agile quick commerce players. Scrutiny also exists over DMart's return on investment, with rising costs and intense FMCG competition potentially limiting profit after tax growth to around 16% in FY27, despite strong revenue increases. Management noted that consumer behavior is volatile, and a temporary buying surge in March 2026, attributed to geopolitical tensions, has since normalized, suggesting LFL growth could be susceptible to external factors.
For historical context, DMart's Q4 FY25 saw a 2.2% dip in net profit to ₹551 crore on nearly 17% revenue growth. During that period, EBITDA margins contracted, and management cautioned about elevated operational costs. The broader consumer discretionary sector is currently recovering, though valuations are stabilizing after the temporary buying spike.
Looking ahead, analysts hold mixed views. Morgan Stanley and Motilal Oswal maintain positive ratings, highlighting DMart's continued store expansion and improving business fundamentals. Separately, Hitesh Shah has been appointed Chief Business Officer for Pharmacy and Food Services; his transition and its impact on strategic execution are being watched. Sustaining growth amid evolving retail dynamics and managing its high valuation will be key factors for investors.