Avenue Supermarts, best known for its DMart chain of stores, is accelerating store additions as competition intensifies within grocery retail.
The value retailer added as many as 28 stores in the March quarter (Q4) of FY25, its latest business update said, the highest in four years.
The latest addition will also see the value retailer add a total of 50 stores in FY25, the highest in three years. The company had last added 50 stores after the Covid-19 pandemic in FY22.
While store additions improve reach for a retailer, analysts at brokerages Citi Research and Morgan Stanley say there is pressure on earnings of DMart from lower sales throughput and adverse product mix. The retailer reported a nearly 17% y-o-y rise in standalone revenue to Rs 14,462 crore for Q4. For the full year of FY25, revenue touched `57,789 crore, a y-o-y growth of 16.6%, lower than the five-year CAGR of 18.5% reported by the retailer, Morgan Stanley said.
The brokerage has estimated a same-store sales growth of 8-9% for DMart in Q4, in line with the trend seen in previous quarters.
Shares of Avenue Supermarts slipped 5% intra-day on Friday on the BSE, before finally settling at Rs 4,039.30 apiece at the end of trade, down 2.82% versus the previous day’s close.
In a note on Friday, Citi Research said that Avenue Supermarts’ average revenue per store grew 3.1% year-on-year in Q4FY25, compared to a 1–7% growth range seen over the previous four quarters.
The brokerage also believes that sales throughput at DMart stores continues to be impacted by an unfavourable product mix, with contribution from general merchandise and apparels falling, driven by a slowdown in discretionary consumption. Store additions in smaller towns and rising competitive pressure from quick commerce is also putting pressure on earnings.
Avenue Supermarts was amongst the first grocery retailers to call out the impact of q-commerce on its metro stores about a year ago. Since then, the q-commerce space, say experts, has continued to evolve, hurting both general and modern trade.
DMart has responded to the aggression displayed by q-commerce majors with higher discounts and has increased its delivery services via its DMart Ready fulfilment centres in select markets.
While this has helped Avenue Supermarts maintain market share in grocery, analysts at brokerage Motilal Oswal say that this has hurt margins of the retailer. In Q3FY25, for instance, DMart’s operating margins slipped below the crucial 8% mark to 7.6%, prompting analysts and investors to remain cautious about the stock.
Out of the 31 analysts that have coverage on Avenue Supermarts, 12 of them have a ‘Buy’ rating on the stock, nine of them say ‘Hold’, while the other 10 have a ‘Sell’ rating.