DMart shares skid 6% on weak Q3; margins squeeze amid intensifying competition

Shares of Avenue Supermarts, which operates the retail chain DMart, declined nearly 6% in opening trade on Monday, in sync with broader market, as sentiment was dented by weak earnings report. The earnings were impacted by drop in gross margin, higher operating expenses, and higher cost of retailing amid rise in quick commerce competition.

Extending losses for the third straight session, DMart shares fell as much as 5.7% to ₹3,474 in the early trade on the BSE. The share price of the retail chain operator has fallen nearly 10% in three sessions.

The counter touched its 52-week low of ₹3,400 on December 20, 2024, and a 52-week high of ₹5,484 on September 24, 2024. The largecap stock has given a negative return of 7% in the last one year, while it corrected 28% in six months; and 1.5% in a month.

In an exchange filing on January 11, Radhakishan Damani-owned company said that its consolidated net profit rose by 4.9% to ₹723.54 crore in the December 2024 quarter. It posted a net profit of ₹690 crore in the corresponding quarter of the previous fiscal.

The consolidated revenue grew 17.6% year-on-year (YoY) to ₹15,973 crore in Q3 FY25, while  Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at ₹1,217 crore versus ₹1,120 crore in the corresponding quarter of last year.

The EBITDA margin stood at 7.6% in Q3FY25 as compared to 8.3% in Q3FY24, while the profit margin also dropped to 5% compared to 5.5% in the year ago period.

“We continue to see increased intensity in discounting in the FMCG category and the consequent impact to high turnover per square feet stores in metro towns. However, this quarter the impact has relatively reduced versus the previous quarter (Q2 FY2025),” says Neville Noronha, CEO & Managing Director, Avenue Supermarts.

Domestic brokerage Nuvama in a note says that DMart’s margins would continue to be under pressure amid the high competition and focus on market share followed by margins. The brokerage has maintained ‘HOLD’ call on the stock with a revised target price of ₹4,212 from ₹5,040 earlier.

“We are trimming revenue/PAT estimates for FY25 and FY26 by 0.5%/11% and 2.1%/17.4%, respectively, on account of lower margins and roll forward to 9mFY27,” it says in a note.

Anshul Asawa to replace Neville Noronha as MD &CEO

On the leadership front, the Mumbai-based company announced appointment of Anshul Asawa as its chief executive officer-designate, effective from March 2025. Asawa, an IIT Roorkee and IIM Lucknow alumnus, will replace Neville Noronha, who has decided to step down as the Managing Director and CEO at the conclusion of his current term in January 2026 - a year from now.

Neville will support Anshul for a smooth transition over the next year and is expected to take over as the MD and CEO on the 1st of February, 2026, upon the completion of Neville's term in that position. He will be joining DMart after a 30-year long stint at Unilever where he had leadership roles overseeing the growth of product categories and developing impactful functions in India, Asia, and Europe. He currently serves as Country Head of Unilever in Thailand and General Manager for the Home Care business unit in Greater Asia. 

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