This Retailer’s Numbers Were Fine. Everything Underneath Not Actually

Sales per store falling, metro stores flatlining, D’Mart Ready retreating from 14 cities 

There is a version of D’Mart’s Q1FY27 result that looks acceptable on the surface — revenue growth of 15%, EBITDA margins holding at 8%, PAT growing 11%. And then there is the version that Prabhudas Lilladher’s note focuses on — store-level metrics that keep deteriorating, a quick commerce threat that is structurally reshaping urban grocery behaviour, and a valuation at 73x FY28 earnings that leaves no room for the disappointing trajectory to persist.

The Headline Numbers 

D’Mart’s consolidated revenues grew 14.9% year-on-year to Rs 187.9 billion — broadly in line with Prabhudas Lilladher’s estimates. Gross margins expanded 49 basis points year-on-year to 15.8%. EBITDA grew 15.4% to Rs 15 billion, with margins at 8% — 4 basis points higher year-on-year. Adjusted PAT grew 11.3% to Rs 8.6 billion. On these headline metrics, the quarter was unremarkable in a good way — steady, predictable, in line.

The problem is what is happening within those numbers. “Sales per store and sales per square foot declined by 3.7% and 3.0% respectively,” the Prabhudas Lilladher report notes — a deterioration that reflects the structural pressure D’Mart’s format is facing rather than a one-quarter aberration. Bill counts grew 13.4% year-on-year, but this was almost entirely driven by the addition of 58 new stores in Q4FY26, not by improved throughput at existing locations. Bills per store per day actually declined 5.1% — meaning fewer transactions are happening at each store, on each day, than a year ago.

The geographic split tells the clearest story. “Non-metro stores grew ahead of metro stores, while older stores in metro areas witnessed flattish growth,” the report states. Metro stores — D’Mart’s most established and historically most productive locations — are the ones being most directly affected by quick commerce. And they are delivering flat growth.

Quick Commerce Is Not a Passing Phase

Prabhudas Lilladher does not frame the quick commerce threat as cyclical or reversible. The brokerage’s cautious stance rests on a view that “increasing competitive intensity from QC players is likely to continue denting metro store performance” — not temporarily, but structurally, as urban consumers increasingly default to ten-minute grocery delivery for top-up shopping and shift only bulk purchases to physical retail.

The impact is visible not just in D’Mart’s store metrics but in D’Mart Ready — the company’s own online grocery delivery service. D’Mart Ready has exited 14 cities in the last 15 months and is now confined to just 11 cities, with management explicitly focusing on larger towns only. “Rising competition from quick commerce is likely to limit growth across modern trade and D’Mart Ready,” the report states.

For a company whose core competitive advantage has historically been the density and throughput of its physical store network in urban India, the combination of weakening metro store productivity and a retreating online business is a genuinely uncomfortable strategic position.

The Balance Sheet Is Getting More Attention

A development that has not received enough investor attention is D’Mart’s planned fundraise. The company plans to raise Rs 10 billion through non-convertible debentures — a departure from the largely debt-light balance sheet that has characterised the business historically. Prabhudas Lilladher estimates that Q1FY27 debt levels have increased from approximately Rs 11 billion to approximately Rs 25 billion year-on-year. For a business whose store expansion model has always been owned rather than leased — a capital-intensive but margin-protective choice — the rising debt level in an environment of weaker store productivity is a combination worth monitoring.

The cost of retail increased 45 basis points year-on-year to 7.8%, as overheads from stores opened in Q4 were reflected in the current quarter’s P&L. This is not unusual for a company adding stores at pace — new stores take time to reach mature productivity — but it adds to the margin pressure at a time when growth visibility is already limited.

The Store Addition Plan Continues 

D’Mart plans to add approximately 75 stores each in FY27 and FY28 — an aggressive pace that reflects management’s long-term conviction in the format’s relevance and the under-penetration of organised retail beyond the top metros. This is the bull case: that the next wave of store additions in smaller cities and non-metro markets will find a consumer base less disrupted by quick commerce, generate better throughput, and eventually restore the store-level productivity metrics that have weakened in urban markets.

Prabhudas Lilladher builds this into estimates but is not convinced it restores the growth trajectory fast enough to justify current valuations. EBITDA margins of 7.4% and 7.0% are forecast for FY27 and FY28 respectively — a step-down from the 7.5% delivered in FY26 — as overhead absorption from new stores and competitive pressure on metro volumes compress the margin profile.

Report

The negative bias attached to the HOLD is significant. Prabhudas Lilladher is not saying the business is broken — it is saying that at 73x FY28 earnings, the market is paying a premium multiple for a business delivering 10.7% EPS CAGR with deteriorating store metrics and no clear catalyst to restore metro store growth. “Rich valuations and limited growth visibility in the near term” is the explicit framing.