Avenue Supermarts shares fell nearly 5% to a fresh 52-week low of ₹3,384 on Tuesday, extending last week's decline and marking the fourth consecutive trading session of losses. The stock was trading 8% lower in the latest session, with the stock declining 12% in October 2026 alone. Motilal Oswal maintained its Neutral rating with a revised target price of ₹3,925, while ICICI Securities maintained Hold with a revised target price of ₹3,700. As per Business Standard, Elara has cut its earnings per share estimates for FY28 and FY29 by 4-5% and lowered its target price for DMart to ₹4,200 from ₹4,700, citing margin pressure and competitive challenges. Jefferies has cut its earnings per share estimates by 2-3% to factor in the Q2 earnings miss, and revised its price target for the stock lower to ₹4,000**, citing margin pressure and productivity concerns.
Avenue Supermarts declared net profit of ₹804 crore for Q2FY27, representing a 7.6% increase from ₹747 crore in the corresponding quarter of the previous year. However, this figure missed Bloomberg estimate of ₹879 crore, marking a disappointment for investors. The company demonstrated strong operational performance with consolidated revenue from operations standing at ₹19,644 crore as compared to ₹16,676 crore in the same period last year. On a standalone basis, the revenue stood at ₹19,206 crore, up 18% YoY from ₹16,219 crore in the same period last year. EBITDA for the quarter stood at ₹1,403 crore, up 14.1% YoY from ₹1,230 crore in the previous year, though EBITDA margin contracted by 28 basis points YoY to 7.3% from 7.6% in Q2FY26. Like-for-like (LFL) growth improved to 9.5%, while the retailer added 18 stores during the quarter, taking its total network to 518 outlets from 500 at the end of FY26. Gross margin contracted 10 basis points to 14.15%, adding to EBITDA pressure as reported by The Financial Express. On a sequential basis, net profit declined 14.1% quarter-on-quarter from ₹935.77 crore reported in Q1FY27, while revenue from operations rose 4.7% QoQ.
Despite strong revenue growth, EBITDA margin contracted by 28 basis points YoY to 7.3% in Q2FY27 from 7.6% in Q2FY26, representing a contraction of 0.2 percentage points. As reported by The Financial Express, this margin compression was attributed to entry-level wage inflation that led to marginal increases in operating expenses. Staff costs and other expenses in Q2 rose 20% and 22.5% year-on-year, respectively, which exceeded revenue growth of 18.4%. Jefferies noted that EBITDA per store/sqft declined by about 4% year-on-year, with store expansion remaining modest but productivity softening as evidenced by a multi-quarter low unit EBITDA for Q2. PL flagged that gross margin remained under pressure as DMart was unable to pass on commodity inflation amid heightened competition from QC players, with no meaningful competitive relief in sight. Basic earnings per share (EPS) increased 8.3% YoY to ₹11.40 in Q2FY27, compared with ₹10.53 in the year-ago quarter.
Beyond margin pressures, inventory management emerged as a key concern with total inventory days increasing from 33.2 days to 36.1 days in the quarter ended September 2026. As reported by Upstox, this slower conversion cycle for acquired goods could lead to poor cash conversion and higher working capital requirements. The return on net worth has fallen to the lowest level in three years, with the return on net worth as of H1FY27 falling to 6.6% from 13.5% in Q1FY27 and 6.8% in H1FY26. This indicates that the company is generating little profit for every rupee of equity invested and implies poor capital allocation efficiency on capital employed. Citi highlighted that profit growth had lagged revenue growth in 11 of the past 14 quarters, reflecting quick-commerce competition, lower other income and higher interest costs. Debt rose to ~₹41 billion and inventory days to 36, supporting expansion but weighing on efficiency and returns. Total debt increased to ₹4,079 crore as of September-end from ₹2,267 crore six months ago, with a sharp 87% rise in interest expenses to ₹59.6 crore following debt issuances in recent quarters. Net debt (excluding leases) surged to ₹2,500 crore from ₹700 crore in March 2026, while working capital has risen to ₹1,900 crore from ₹700 crore a year ago due to expansion activities.
The company added 18 new stores during Q2FY27, taking its total store count to 518 stores as of September 30, 2026, from 500 at the end of FY26. According to latest reports, this includes one store at Navi Mumbai that is currently closed for customers due to reconstruction. The retail business area now stands at 21.4 million sq ft. A key highlight of the quarter was stronger growth at older stores, with two years and older DMart stores growing by 9.5% during Q2 FY27 as compared to 6.8% in Q2 FY26. Elara noted that store additions were in line, with 18 stores added in H1FY27, representing 20% of the FY27E estimate of 90 store additions, which is broadly in line with historical contribution in H1. Management highlighted that legacy stores in markets like Mumbai and Bengaluru have reached maturity, reducing the upside from like-for-like growth, with legacy stores in markets like Mumbai and Bengaluru having reached maturity, reducing the upside from like-for-like growth. Overall store additions are expected to pick up in the second half of FY27, which could support revenue growth.
DMart's online grocery and essentials platform, DMart Ready, operated in 11 cities in the first half of FY27, down from 19 cities in the corresponding period a year ago. The subsidiary reported a net loss of ₹60.6 crore during Q2FY27, with revenue declining 4% during the quarter. The company's presentation showed DMart Ready's presence in 11 cities during the first half, although the results announcement did not separately detail the online business's financial performance. Citi highlighted that profit growth had lagged revenue growth in 11 of the past 14 quarters, reflecting quick-commerce competition, lower other income and higher interest costs. Vikram Dasu, Whole Time Director and CEO of Avenue E-Commerce Ltd, which operates DMart Ready, noted that the company is focused on driving greater operational efficiencies and strengthening overall customer experience in the cities that it currently operates in. ICICI Securities noted that dark-store network densities in metros/tier-1 cities and an expanding delivery portfolio in non-grocery categories continue to weigh on store footfalls and planned purchases, despite DMart's EDLC-EDLP model remaining a key strength supporting value-led footfalls and position in staples.
