Why Dmart Share Price is Falling

It's the quarterly earnings season, a time when investors are on the edge, eagerly tracking numbers like kids who are waiting for their exam results. Some companies ace the tests and get applause, while others fall short and face the heat.

Today, one such company that has caught everyone's attention is DMart.

DMart, operated by Avenue Supermarts, runs a chain of hypermarkets across India. It focuses on offering household products, groceries, and essentials at discounted prices, positioning itself as a value-driven retailer.

With over 300 stores nationwide, the company has built a loyal customer base. Its low-cost model and efficient supply chain have been key to maintaining steady growth, making it a preferred stock in the retail space.

The share price of Dmart's parent company Avenue Supermarts was under intense pressure today, slipping over 8.5% in intraday trade after it reported its .

Let's take a closer look at the company's results to understand what triggered this steep decline.

Disappointing Quarterly Results

Avenue Supermarts share price tumbled after the company missed street expectations for its Q2 earnings. The company saw its financials fall short, with revenue and profit growth slower than expected, along with rising costs.

DMart's net profit for Q2FY25 came in at Rs 6.6 billion (bn), rising only 5.8% from Rs 6.2 bn reported last year, leaving investors unimpressed. Higher employee costs also dragged down the company's profits.

Its revenue increased 14.4% year-on-year (YoY) to Rs 144.4 bn, and even this double-digit growth failed to meet street expectations.

At the operational level, earnings before interest, tax, depreciation, and amortisation (EBITDA) stood at Rs 10.9 bn, up from Rs 10.1 bn a year ago, though margins shrank to 7.6% from 8.0%.

The slowdown in same-store sales growth (SSSG) at 5.5% also weighed heavily on investor sentiment.

Several brokerages responded to the weak numbers by downgrading the stock.

Increased competition from online grocery platforms is becoming a challenge, especially for DMart's stores in metro cities. The management acknowledged that rising e-commerce activity is hurting sales of general merchandise and apparel, leading to higher investments and pressure on margins.

What Next?

DMart is currently facing increasing competition from quick commerce platforms like Blinkit, Zepto, and Instamart, especially in metro cities. These platforms are attracting young consumers with fast delivery times and discounts.

This shift toward convenience is starting to impact DMart's performance, particularly in large metro stores. The company now needs to adapt quickly to changing market trends.

DMart's growth strategy includes ramping up its online grocery service, DMart Ready. It plans to improve delivery metrics, aiming for 100% deliveries within 12 hours, compared to the current 40-45%.

The company is also investing in more fulfilment centres to enhance delivery infrastructure and reduce wait times. Store expansion has slowed over the years, which is limiting DMart's ability to grow its market share in general merchandise and apparel.

MiniMax, its experimental format, is still under development, while its private brands have not yet gained significant relevance. To stay competitive, DMart needs to accelerate store openings and refine these initiatives.

There are also regulatory concerns about the rapid growth of quick commerce platforms. The government has voiced worries about the effect of aggressive discounting and dark stores on smaller businesses and kirana shops.

Any future action to regulate these platforms could offer DMart some breathing room.

Going forward, DMart's focus will be on balancing its physical stores with digital expansion through DMart Ready.

Ultimately, Dmart's success will depend on how well it navigates competition, accelerates store openings, and leverages technology to meet customer needs efficiently.

How DMart Share Price has Performed Recently

In the past five days, DMart share price is down 7.3%. In the last month, it has slipped 19.5%.

Following the disappointing Q2 update, the stock price crashed over 8% in intraday trade today, i.e. 14 October 2024.

Avenue Supermarts share price is up 3.1% in 2024 so far while in the past 1 year, it has moved up by 9%.

The stock touched its 52-week high of Rs 5,484 on 24 September 2024 and a 52-week low of Rs 3,618.9 on 25 October 2023.

About DMart

Avenue Supermarts is an Indian retail corporation that operates a chain of hypermarkets in India. It was founded by Radhakishan Damani in 2002, with its first branch in Powai's Hiranandani gardens.

Its stores are present in Maharashtra, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, National Capital Region, Tamil Nadu, Karnataka, Uttar Pradesh, Daman, and Punjab.

To know more check out the company's factsheet and quarterly results.

You can also compare the company with its peers:

Avenue Supermarts vs V-Mart Retail

Avenue Supermarts vs Spencers Retail

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...