Avenue Supermarts posts strong Q3 FY26 profit growth with margin expansion, but same-store sales slip to 5.6% amid deflation and competition concerns.
Avenue Supermarts posted quarterly results that divided analyst attention between strong profitability and a troubling slowdown in its core business metrics. The company added stores at a steady clip to generate headline revenue growth, but the performance of existing locations revealed pressure points that both Axis Securities and Motilal Oswal flagged in their assessments.
Revenue grew 13.3% to Rs 18,101 crore in Q3FY26, driven primarily by store expansion rather than organic growth. Like-for-like growth slowed to 5.6%, down from 6.8% in the previous quarter. Axis Securities noted that “LFL growth in the quarter was among the weakest over the past 24 months, impacted by a deflationary pricing environment in the staples/FMCG segment, GST-related disruption in Oct’25, and the temporary closure of the Sanpada store in Navi Mumbai for renovation, which is still included in the store count and likely resulted in a 30–40 bps drag on revenues.”
The company added 10 stores during the quarter, bringing its total to 442 locations spanning 18.3 million square feet. Motilal Oswal’s analysis revealed that “DMART’s store count rose ~14% YoY, while annualized revenue per store declined ~1% YoY to INR1.6b and annualized revenue/sq. ft was flat YoY at INR38.9k.” The brokerage reported that stores added in the quarter averaged 40,000 square feet, “which is slightly lower than average store size of 41.4k sqft.”
EBITDA margins expanded 46 basis points year-over-year to 8.1%, supported by gross margin improvement of 58 basis points. Motilal Oswal reported that “GM expanded 50bp YoY to 14.6% (~60bp beat) in 3Q, likely driven by GST reduction benefits (lower discounting) and a favorable category mix (higher GM&A and FMCG share at the expense of the lower-margin Food category).” Gross margins have remained above 15% for three consecutive quarters.
Net profit grew 18.3% to Rs 856 crore. Axis Securities stated that “reported PAT stood at Rs 856 Cr, registering 18.2% YoY growth, driven by a 20.2% YoY increase in EBITDA.” Motilal Oswal highlighted that after several quarters of cost pressure, “DMART reported a stable CoR per sqft in 3Q, driving 50bp EBITDA margin expansion to 8.4% (~80bp beat) and a 20% YoY standalone EBITDA growth (11% beat).”
The product mix shift contributed significantly to margin performance. General Merchandise and Apparel increased its revenue share by 15 basis points to 22.3%, while Non-food FMCG rose 45 basis points to 20.2%. The Foods category declined 60 basis points to 57.5%. Motilal Oswal observed that “Foods, the largest contributor to DMART’s revenue, saw a moderation in growth to ~12% YoY in 3Q (vs. ~16% YoY in 2QFY26), likely due to deflation.” The brokerage added that Non-food FMCG “saw a rebound in growth, with ~16% YoY growth (vs. ~13% YoY in 2Q), resulting in its share rising ~45bp YoY to 20.2%.”
Both brokerages expressed caution about the sustainability of margin gains. Motilal Oswal stated: “While DMART saw a margin recovery after several quarters, we believe increased pricing competition from QC could prevent margin sustainability and remains a key monitorable in the near term.” Axis Securities similarly warned that “key risks include a slower-than-expected recovery in consumer demand, persistent pricing pressure in staples, and heightened competitive intensity in the value retail segment.”
At Rs 3,801 per share, the stock trades at approximately 86 times FY26 earnings. Motilal Oswal assigned a target price of Rs 4,600, valuing the company at “~43x FY28 EV/EBITDA multiple (implying ~79x FY28 P/E),” representing 21% upside. Axis Securities set a target of Rs 4,450 using “70x Dec’27 EPS,” implying 17% upside. The stock has declined from its 52-week high of Rs 4,950.
Motilal Oswal projects a “CAGR of 16%/16%/12% in DMART’s consol. revenue/EBITDA/PAT over FY25-28E, driven by a 15% CAGR in store additions and ~6% LFL growth.” This forecast assumes like-for-like growth will recover from current levels of 5.6% to approximately 6% on average. Axis Securities models a similar trajectory, projecting revenue growth of 19%, EBITDA growth of 20%, and PAT growth of 17% over FY25-28.
Estimate revisions reflected both the margin beat and concerns about demand recovery. Axis Securities reported: “Changes in Estimates post Q3FY26: FY26E/FY27E – Revenue: 0%/-1%; EBITDA: -1%/-3%; PAT: 1%/-8%.” The 8% reduction to FY27 profit estimates indicates increased caution about the pace of recovery. Motilal Oswal raised estimates by 3-5% but acknowledged the competitive pressures: “We raise our FY26-28 EBITDA and PAT by ~3-5%, primarily driven by higher GM.”
Category performance provided granular insight into consumer behavior. Motilal Oswal’s quarterly tracking showed Foods growth moderating to approximately 12% year-over-year from 16% in the prior quarter. The brokerage attributed this to deflation, noting “Revenue growth was partially impacted by deflation in staples.” General Merchandise grew approximately 14% year-over-year, with Motilal noting “the segment grew ~14% YoY in 3Q (vs. 15% YoY in 2Q), with its share in DMART’s category mix rising 15bp YoY to 22.3%.”
Store expansion remains the primary growth driver. Axis Securities reported that “Management’s plan to pursue ~15% store addition on the existing base of 442 stores reflects a balanced approach that prioritises returns and profitability over aggressive expansion.” Both brokerages model approximately 60 store additions for FY26. Motilal Oswal stated: “Acceleration in store addition remains the key growth trigger for DMART. We build in ~60 store additions in FY26.”
Strategic priorities extend beyond store count. Axis Securities outlined management’s focus: “Looking ahead to FY27, DMart’s strategic emphasis on improving store productivity, enhancing profitability, and accelerating recovery in the General Merchandise & Apparel (GM&A) segment positions the company well for a gradual earnings recovery.” The brokerage noted: “With GM&A being a higher-margin category, any sustained pickup in discretionary spending could meaningfully improve overall profitability in FY27.”
The DMart Ready online platform continues to operate at a loss but showed improvement. Motilal Oswal noted that consolidated EBITDA performance benefited from “slightly lower operating losses in the subsidiary (~3.6% operating loss margin, vs. -4.4% YoY and our estimate of -4.1%).” Axis Securities reported that management is “calibrating expansion to improve profitability in D-Mart Ready.”
Quick commerce competition emerged as a recurring theme in both reports. Motilal Oswal assessed: “We believe DMART’s value-focused model and superior store economics would ensure its competitiveness and customer relevance over the longer term, despite QC’s convenience-focused model,” while cautioning that “increased pricing competition from QC could prevent margin sustainability and remains a key monitorable in the near term.”
Brokerages maintain buy ratings. Motilal Oswal said in its report: “We reiterate our BUY on DMART.” Axis Securities stated: “Considering the company’s recent initiatives, coupled with store expansion and an improved demand environment, we maintain our BUY rating on the stock.” However, Axis reduced its target price from Rs 4,960 to Rs 4,450, reflecting the estimate cuts, while Motilal raised its target from Rs 4,300 to Rs 4,600 following the margin beat.
On risk factors, Axis Securities listed: “Key risks include a slower-than-expected recovery in consumer demand, persistent pricing pressure in staples, and heightened competitive intensity in the value retail segment.” The brokerage also noted as a key risk that “the anticipated recovery in consumer demand and a strong festive outlook may not materialise, thereby failing to translate into improved performance for the company.”
The macroeconomic backdrop factors into both forecasts. Axis Securities stated: “Its continued focus on passing on GST-related benefits to customers, along with stabilising macroeconomic conditions and normalising consumer demand, is expected to support volume-led growth.” The brokerage added that “improving consumer sentiment, supported by stable macroeconomic conditions and GST 2.0 reforms, is expected to strengthen these efforts and drive growth in higher-margin general merchandise and apparel categories.”
Motilal Oswal’s notes that DMart is trading at approximately 43x one-year forward EV/EBITDA, which represents roughly a 28% discount to its long-term average of 60x, and approximately 76x one-year forward P/E, a 24% discount to its long-term average of 100x. The stock has underperformed the BSE Sensex by 9% over the past 12 months.
