DMart Q2 Update Disappoints Street As Quick Commerce Battle Intensifies

Avenue Supermarts Ltd. is navigating the challenges of quick commerce competition while contending with a slowdown in growth and store additions. In its second quarter update on Thursday, the operator of DMart reported a sharp slowdown in same-store sales growth, falling short of pre-second-quarter targets.

"Stock could be bit weak in near term, as like for like growth is muted and below expectations, store addition, though weak, is generally back ended," said Abneesh Roy, executive director of research at Nuvama Institutional Equities.

The company posted a revenue of Rs 14,050.32 crore for the second quarter of financial year 2025, compared to Rs 12,307.72 crore in the same quarter last year. It added six new stores, bringing the total to 377.

Five brokerages—Morgan Stanley, Bernstein, Goldman Sachs, JPMorgan and Macquarie—cited increased competition from quick commerce players like Blinkit as a key reason for Avenue Supermarts' slow growth.

The rapid expansion of grocery quick commerce in major cities has resulted in a shift of consumer preference towards convenience, affecting Avenue's same-store sales growth. Additionally, slower store additions and weaker growth projections point to a more challenging operating environment.

Here is what brokerages have to say about Avenue Supermarts' Q2 update.

Goldman Sachs maintained a 'sell' rating with a target price of Rs 4,050 per share, pointing to an 18% downside.

The brokerage cited slower store additions and a sharp slowdown in same-store sales growth. Rapid rise of quick commerce players is adversely impacting Avenue's growth in key urban markets, and there is a risk that store additions this fiscal may fall short of management guidance, it said. The brokerage also cut its FY25–27 estimates by 2%.

Morgan Stanley has an 'overweight' rating on the stock, with a target price of Rs 5,769 per share, suggesting a 17% upside.

The brokerage pointed out that growth was below expectations and expressed the need for management clarification on the slowdown. Morgan Stanley noted that topline growth was driven by weak same-store sales growth, with an implied growth rate of 3%.

JPMorgan also had an 'overweight' rating, with a target price of Rs 5,400 per share, implying a 9.3% upside.

Second quarter revenue growth moderation at 14% was disappointing, it said, attributing the slowdown to extended rainfall and supply chain disruptions.

Avenue Supermarts has maintained competitive pricing compared to peers, and price increases in select FMCG categories could support growth in the coming months, JPMorgan said.

Bernstein retained an 'outperform' rating with a target price of Rs 6,300 apiece, implying a 27% upside.

D-Mart's standalone revenue missed estimates for the past five quarters, while consolidated revenue beat estimates, driven by the strong growth of DMart Ready, which saw an 82% compound annual growth rate, it said.

Affluent customers in metro areas are migrating some purchases to quick commerce, it noted. But D-Mart remains well-positioned to cater to the 'Next-30' segment by focusing on DMart Ready, private label brands, and accelerating store openings, it said.

Nuvama noted that Avenue Supermarts posted revenue of Rs 140.5 billion, growing 14% year-on-year, and added six new stores this quarter, totalling 377. While store productivity per square foot increased by just 1% year-on-year, the remaining growth came from store area expansion, it said.

The brokerage also pointed out that slower store additions are placing pressure on mature stores, which now make up 80% of the store mix, compared to around 72% pre-Covid.

Like-for-like growth will be a key metric to monitor in the coming months, Nuvama said.

Macquarie retained an 'outperform' rating with a target price of Rs 5,600, indicating a 13% upside.

The brokerage highlighted that Avenue Supermarts' sales growth was below estimates, with slower-than-expected store additions. Macquarie projected standalone Ebitda margins at 8.1%, suggesting some challenges with cost control amid weaker growth.

Shares of Avenue Supermarts closed 0.24% lower at Rs 4,942.60 apiece, compared to a 2.12% fall in the benchmark NSE Nifty on Thursday.

The stock has risen 27.62% year-to-date and 21.06% over the past 12 months. The relative strength index was at 36.91.

Fourteen of the 27 analysts tracking D-Mart have a 'buy' rating on the stock, five recommend a 'hold' and eight suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 1.4%.