From rising costs to softer sales, DMart clocks yet another margin-hit quarter

Avenue Supermarts Ltd, the operator of DMart, reported a subdued Start to the earnings season on Friday as margin pressures and soft discretionary spending dragged down performance in the first quarter of FY26.

Revenue for the April-June quarter stood at ₹15,932 crore, a 16.19% increase from a year earlier. However, this fell short of the ₹16,579 crore projected by four Bloomberg-polled analysts, marking a rare miss for India’s largest retailer by market capitalisation.However, there was a bright spot, as net profit rose 2.1% year-on-year (y-o-y) to ₹829.73 crore, even though it missed analyst expectations of ₹856.2 crore.

CEO Neville Noronha pointed to multiple headwinds following the earnings announcement. “Revenue growth impact of approximately 100-150 bps was primarily due to high deflation in many staples and non-food products. Gross margins are lower compared to the same period in the previous year, due to continued competitive intensity within the FMCG space. Operating costs are higher due to our efforts on improving service levels, capacity building and inflation at entry-level wages,” said Noronha.

The Mumbai-based retailer added nine new stores in the quarter, taking its total count to 424. While the expansion continues, performance at mature outlets slowed.

Same-store sales, or stores open for over two years, rose just 7.1%, down from 9.1% in the same quarter last year—a sign of fatigue in footfalls or ticket size in established locations.

Discretionary spending also remained under pressure. General merchandise and apparel, which typically carry higher margins, contributed just 24.7% to revenue, down from prior quarters. Food and grocery, a lower-margin category, made up 55.6% of total sales.

Pratik Prajapati, equity analyst at Ambit, said, “Same-store sales growth has come down because from the first quarter of last fiscal to the current first quarter of FY26, they have added so many stores, now it’s 424. That’s why it looks muted, but it will improve eventually.”

The biggest dent to profitability came from rising employee expenses, which jumped 30.6% year-on-year (y-o-y) to ₹301.79 crore. Analysts note that competition from gig work in quick commerce is making it tougher for traditional retailers to retain talent.

“Retailers like DMart are trying their best to retain employees as many are switching to gig jobs,” Prajapati added.

Operating expenses also increased due to investments in service quality and infrastructure—elements critical to DMart’s competitive “Everyday Low Cost” promise.

The company also named Anshul Asawa as CEO-designate, who will succeed long-time leader Neville Noronha.

Looking ahead, Prajapati expects stable growth. “In the coming quarter, we can see the growth rate remain steady, and in the next couple of quarters, DMart might just expand more in Uttar Pradesh. This year’s Diwali could also be strong as the income tax benefits will start showing in the second half,” he said.

DMart’s muted quarter comes amid a broader slowdown in consumption. Tata-backed Trent, another major retail player, also flagged moderation in growth, with expectations of a 20% y-o-y growth in Q1, down from the five-year average of 35%.

DMart’s cautious tone was also reflected in its investor presentation, which cited deflation in staples and no forward-looking guidance. The stock closed 1.2% lower at ₹4,110.35 on the BSE on Friday, ahead of the earnings release, while the benchmark Sensex declined 0.41%.

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