DMart grows sales 18%, but profit rises just 8%

Avenue Supermarts Limited (DMART), the operator of DMart, reported consolidated revenue of ₹19,644 crore in Q2 FY27, up 17.8% year on year. Net profit rose only 8.5% to ₹743 crore. The gap between sales and profit growth deserves attention. EBITDA increased 14.7% to ₹1,393 crore, slower than revenue growth. Consolidated EBITDA margin declined to 7.1% from 7.3% a year earlier. Net profit margin also fell to 3.8% from 4.1%. There is a positive signal in the business update. Same-store sales growth for stores operating for at least two years improved to 9.5%, against 6.8% a year earlier. DMart also added 15 stores, taking its total network to 518. My view is that demand is not the main concern here. Existing stores are growing faster, and the company continues to expand. The question is how much of that growth reaches the bottom line. Entry-level wage inflation has added pressure to operating expenses. If costs continue rising faster than sales, DMart may need stronger store productivity to protect margins. The next trigger is Q3 FY27 results. I want to see whether margin pressure eases while same-store sales growth remains healthy. My stance: The business is growing, but I would want evidence of improving profitability before becoming more positive on the stock.