For DMart, quick commerce threat comes to the fore

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Subscribe to enjoy similar stories. Avenue Supermarts Ltd’s shares fell over 8% on Monday after its September quarter (Q2FY25) earnings missed expectations and concerns rose on growth prospects amid intensifying competition from quick commerce companies. Avenue runs the DMart supermarket chain.

Standalone Ebitda margin in Q2 dropped 27 basis points year-on-year to 7.9%, which was below analysts’ estimates and comes at a time when gross margin expanded 21 bps to 14.2%. Gross margin increased aided by a small rise in the share of revenue from the high-margin general merchandise and apparel segment. However, staff costs and other expenses grew sharply, hurting Ebitda margin and leading to a relatively slower pace of Ebitda growth of 10% to ₹1,105 crore.

But that’s not all. Revenue growth has slowed down. For the first half of FY25, like-for-like revenue growth was 7.4% for stores that are two years and older.

However, like-for-like revenue growth for the same cohort of stores was 5.5% in Q2FY25. The company acknowledged that it sees the impact of online grocery formats, including DMart Ready in large metro DMart stores which operate at a very high turnover per square feet of revenue. Also Read: Small brands jazz up pitches in scramble to join quick commerce platforms IIFL Securities believes that the impact could gradually spread to other stores too as convenience behaviour catches on and discounting by quick commerce players could increase given higher competition and improving business economics.