Same-store sales growth (SSSG) for stores operational for two years or more improved to 9.5 per cent in Q2FY27 (6.8 per cent in Q2FY26). But lower-margin sales, operating cost pressures and store expansion have put a ceiling on profits.
Revenue per square foot declined 0.9 per cent Y-o-Y to ₹8,975, while Ebitda per square foot fell 4.6 per cent Y-o-Y to ₹656. Revenue per store declined 1.2 per cent Y-o-Y to ₹37.1 crore, while Ebitda per store contracted 4.9 per cent Y-o-Y to ₹2.7 crore. The expanding store network should gradually become more profitable.
During Q2FY27, food revenue grew 19.2 per cent Y-o-Y, while non-food and general merchandise & apparel (GM&A) revenue increased 16.8 per cent and 17.8 per cent, respectively. Food carries lower margins than other categories and contributes 59 per cent to revenue. Employee costs increased 2 basis points Y-o-Y as a percentage of revenue. Other expenses rose 16 basis points Y-o-Y.
DMart issued 111 million bills during the quarter, implying Y-o-Y growth of 14.4 per cent. The company added 15 stores (18 stores in H1FY27), taking the store count to 518. The company added 85 stores in FY26 compared with 50 in FY25. DMart has a target of 15 per cent annual store-count expansion. Management highlighted that legacy stores in markets like Mumbai and Bengaluru have reached maturity, reducing the upside from like-for-like growth. Intensifying competition from quick-commerce and e-commerce players will also be a factor.
DMart Ready is focused on improving the operating model and deepening its presence in large markets. The online business was operational in 19 cities a year ago, and this has been reduced to 11 cities as part of the change in the operating model. The online segment is a new channel, but profitability is going to be driven by unit economics and scale. In Q3FY27, results could be boosted by a lower base in Q3FY26 (13.2 per cent Y-o-Y), the GST transition impact and changes in festival timings.
Capex in FY26 was ₹4,100 crore, and capex over the next three fiscals would be closer to ₹5,000 crore per year. Capex is up 22 per cent Y-o-Y. Employee expenses are up 20 per cent. There is an 87 per cent rise in interest costs and a 29 per cent decline in other income, reflecting higher borrowings.
Given the ongoing expansion and the product mix with its high share of food, operating leverage should improve gradually. This implies Ebitda margins would be around 7.5 per cent for FY27 and move up by around 20 basis points in the next two fiscals. As stores mature, revenue per square foot should improve by mid-single digits. Annual growth in revenue, Ebitda and net profit should be in the high teens until FY29. One positive is good working capital management, with the inventory cycle at 38-40 days and the net working capital cycle at 28 days. But due to the expansion, there has been an inventory build-up, and working capital has risen to ₹1,900 crore from ₹700 crore a year ago. Net debt (excluding leases) surged to ₹2,500 crore from ₹700 crore in March 2026.
Consolidated revenue grew 18 per cent Y-o-Y to ₹19,640 crore, and consolidated Ebitda rose 15 per cent Y-o-Y to ₹1,390 crore as the Ebitda margin dipped 20 basis points Y-o-Y to 7.1 per cent. Operating losses at subsidiaries dropped to 2.3 per cent (3.6 per cent Y-o-Y and 6.1 per cent Q-o-Q). Consolidated net profit grew 8 per cent Y-o-Y to ₹740 crore, and consolidated net profit margin contracted 35 basis points Y-o-Y to 3.8 per cent. The trend towards lower margins and higher costs, allied to higher competitive intensity, is likely to disappoint investors. Analysts have cut earnings estimates as it seems growth in revenue will take a while to translate into higher profitability.
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