Competition, pace of store additions to keep DMart under pressure

Intensifying competition and slower new-store openings are squeezing India's retail heavyweight

The stock of retail major Avenue Supermarts (DMart) is trading at a 10-month low, down 23 per cent since early September. Weak sentiment stems from falling same-store sales (SSS) growth, revenue pressure from intensifying competition with quick-commerce (qcom) companies, and a slower pace of new store addition. 

These factors have led to earnings cuts and downgrades by brokerages. Despite the correction, the stock trades at 68-75x its 2026-27 (FY27) earnings estimates. The stock may continue to underperform, as the company’s 2025-26 (FY26) third-quarter (October-December/Q3) update confirmed a trajectory of sluggish revenue growth, muted store addition, and lower revenue per square foot. 

The company’s Q3 revenue growth of 13 per cent was lower than Street estimates of 14-17 per cent and below the 15-16 per cent recorded in the first (April-June/Q1) and second (July-September/Q2) quarters of FY26. DMart added 10 stores sequentially, taking the total to 442 — below expectations. JM Financial points out that sales per square foot at $9,730 were 3 per cent lower than the Q3 2019-20 (FY20) level of $10,000. The brokerage has a ‘reduce’ rating on the stock. 

In a post-update note, Motilal Oswal says DMart’s gross margin stabilised in Q2FY26. However, given the weak revenue print

and increased discounting by qcom players, margin pressure is exp­ected to persist over the med­ium term. While discounting intensity is likely to remain elevated, acceleration in store additions remains DMart’s key growth lever, it adds. 

Analyst Abhijeet Kundu of Antique Stock Broking says key monitorables include a recovery in sales of higher-margin general merchandise and apparel, stabilisation in mature-store SSS growth, and the company’s ability to counter online grocery competition. SSS growth fell to 6.8 per cent in Q2FY26 and to low single digits in Q3, from 8.4 per cent in 2024–25 (FY25). 

Kotak Securities highlights that a rising proportion of older stores, combined with slower new additions, could weigh on SSS growth. Analysts Garima Mishra and Ishani Swain note that older stores continue to account for a larger share of DMart’s network. In FY20, 131 of the company’s 214 stores — 61 per cent — were over three years old. By FY25, that share had risen to 68 per cent and may continue to climb unless store expansion picks up. Mature stores typically deliver slower SSS growth as market potential peaks, making new additions critical. 

The brokerage has cut SSS growth assumptions for FY26 through 2027-28 (FY28), translating into a 1-3 per cent revenue reduction and a 3-7 per cent cut in earnings per share estimates. It retains a ‘sell’ rating with a target price of $3,570. 

Several brokerages have flagged the impact of sharper competition. Goldman Sachs expects competitive pressure to remain elevated in the near term, potentially weighing further on growth and margins. It cites rapid qcom expansion and fresh capital raises in support of its view. Industry net order value (NOV) reached $12-13 billion as of September 2025, more than doubling over the past 12 months. NOV is projected to hit $50 billion by 2029-30, implying annual growth of about 40 per cent. 

Swiggy has announced a capital raise of up to $1.1 billion, while Zepto raised $450 million, likely pushing competition higher.  Blinkit plans to expand its dark-store network from 1,816 in Q2FY26 to 3,000 by the fourth quarter of FY27. 

Analysts led by Arnab Mitra project Blinkit’s NOV could exceed DMart’s net sales in FY27. Goldman Sachs has cut its earnings estimates by 1-3 per cent for FY26-28 to factor in slower growth amid rising competition and maintains a ‘sell’ rating with an unchanged target of $3,425.