Avenue Supermarts’ revenue growth performance was already known from its September quarter (Q2FY27) update on 3 October, so margins were in the spotlight when results were announced on Saturday. Here, investors must brace for some disappointment, as margins have dipped.
Standalone Ebitda margin decreased by 102 basis points (bps) sequentially and contracted 28 bps year-on-year to 7.3% in Q2, coming in below expectations. Ebitda increased by 14% year-on-year to ₹1,403 crore. Some analysts have now trimmed their earnings estimates for FY27 and FY28.
Avenue, which runs the DMart supermarket chain, faced challenges from cost pressures and intensifying competition from quick-commerce companies.
“Store expansion remained modest, but productivity softened, as evidenced by a multi-quarter low unit Ebitda for Q2,” said Jefferies India’s analysts in a report on 11 October, adding Ebitda per store/sqft declined by about 4% year-on-year. The brokerage has cut its earnings per share (EPS) estimates by 2-3% to factor in the Q2 earnings miss, and revised its price target for the stock lower to ₹4,000. Avenue’s shares fell by about 4% on Monday to ₹3,384, further extending last week’s 7.8% drop.
Gross margin contracted 10 bps to 14.15%, adding to Ebitda pressure. The company said wage inflation at entry-level has led to a marginal increase in operating expenses. Staff costs and other expenses in Q2 rose 20% and 22.5% year-on-year, respectively. Both increases exceeded revenue growth of 18.4%, a notable improvement from Q1’s 15.1%, which had declined from the 19% growth seen in Q4FY26.