DMart's sales grow 18.4%, but margins remain under pressure

Avenue Supermarts Limited (NSE: DMART) reported standalone revenue growth of 18.4% YoY to ₹19,206 crore in Q2 FY27. Standalone profit after tax grew just 7.6% to ₹804 crore, while same-store sales growth improved to 9.5%. The most encouraging number in this result is the 9.5% same-store sales growth, compared with 6.8% in the year-ago quarter. It suggests that growth is not coming exclusively from opening new stores. Existing stores are also contributing more meaningfully. However, the gap between revenue and profit growth deserves attention. Revenue increased 18.4%, but EBITDA grew 14.1%. The standalone EBITDA margin declined to 7.3% from 7.6% a year ago. DMart's value-led pricing strategy is central to its competitive advantage. The company deliberately operates with relatively low margins to offer competitive prices and drive higher volumes. But when costs rise faster than operating leverage improves, revenue growth does not translate proportionately into earnings growth. The company added 15 stores during the quarter, taking its total network to 518. Expansion supports future growth, but new stores also require investment before they reach mature productivity levels. My view: DMart's demand momentum is improving, but the profitability trend is less impressive than the revenue headline suggests. I would focus on whether the company can sustain high-single-digit same-store growth while stabilising margins. That combination would provide a stronger basis for earnings growth than aggressive store expansion alone.