DMart shares fall as quick commerce hits metro sales
DMart's first-quarter revenue grew nearly 15%, but flat sales in major cities and widening losses in its delivery arm have triggered a 4% share price drop and divergent analyst ratings.
DMart shares fell 4% after the Indian retailer reported first-quarter results that exposed a growing divide between its urban and regional operations. Revenue rose 14.9% year-on-year to Rs 18,794 crore, while EBITDA climbed 15.4% to Rs 1,499 crore. EBITDA margins improved marginally to 8% from 7.9%.
The headline growth masked a notable slowdown in core retail metrics. Same-store sales growth decelerated to 5.5% from 7.1% a year earlier, while bills per store declined 4.4%. Although customer transactions increased 13.4%, average bill value rose just 1.5%, reflecting pressure on urban store throughput.
Analysts attributed the weakness to the structural rise of quick commerce. Same-store growth in large metro locations remained flat, a stark contrast to the 14-15% growth posted by non-metro stores. This urban pressure is forcing a strategic retreat in the company's rapid delivery segment.
Revenue growth at the DMart Ready unit slowed to 5.5% and losses widened. The retailer exited seven more cities during the quarter, shrinking its rapid delivery footprint from around 25 to 11 cities to sharpen its focus on large metros.
Physical expansion also slowed, with only three new stores opened compared to nine in the prior year. To fund its operations, the company issued Rs 10 billion in non-convertible debentures, signalling continued capital requirements.
The mixed performance produced a split in analyst recommendations. Motilal Oswal maintained a Buy rating, raising its target price to Rs 4,800 from Rs 4,750. It cited resilient margins and expects the company to add 85 to 90 stores annually over FY27-29, banking on its value-focused model in smaller towns. Elara Capital kept an Accumulate rating with a Rs 4,700 target.
HDFC Securities retained an Add rating but trimmed its FY27 and FY28 earnings estimates by 3% and 2%, respectively, setting a target of Rs 4,150. Conversely, one brokerage issued a Sell rating with a Rs 3,700 target, warning that weakening growth and a premium valuation of roughly 70 times forward earnings leave the stock exposed to de-rating risk.
