DMart’s Q1 results to test investor optimism in CEO succession plan

It has been nearly six months since the company, which operates the DMart retail chain, disclosed that long-time chief executive Neville Noronha would step down by January 2026. Anshul Asawa was named as the next CEO.

Since the announcement on 11 January 2025 through 9 July, the company’s shares have risen about 25%, outperforming the BSE Sensex, which gained 12% during the same period. This suggests investors have so far supported the company’s plan for a smooth leadership handover.

That optimism, however, may now be tested as Avenue Supermarts prepares to report its financial results for the April–June quarter.

According to a 2 July analyst report by Motilal Oswal Financial Services, authored by Vishal Punmiya and Jay Mehta, the company is expected to report a revenue of about ₹16,378 crore for the first quarter of FY26. This would mark a 16.4% increase from the same period last year. Operating profit is projected to rise 11.4% to ₹1,360 crore, while net profit is likely to grow 6% to ₹820 crore.

The company’s profit margin, however, is expected to decline slightly to 8.3%, down from 8.7% a year earlier. This decline is attributed to weaker demand for non-essential items such as home goods and apparel.

These products generally yield higher margins than grocery staples, which tend to be more price-sensitive. Customers often compare prices closely on daily-use products like rice, oil, and milk, leading to tighter competition and lower markups. In contrast, discretionary items like clothing, kitchenware, and cleaning products are purchased less frequently, allowing retailers to charge higher margins.

Avenue Supermarts is scheduled to announce its earnings for the June quarter on 11 July.

Five key things to watch out for in DMart’s Q1 results:

Demand for general merchandise remains weak

While demand for food and grocery items remains stable, sales of general merchandise and apparel, typically higher-margin categories, have softened. According to the Motilal Oswal report, this could be due to unusually hot summer weather and low urban consumer spending.

As a result, the company’s ability to earn more from each sale may have been impacted. Gross margin is expected to remain flat at 14.9%.

Growth driven largely by new store additions

The company added nine new stores during the quarter, bringing its total store count to 424. However, revenue growth appears to be driven primarily by these new openings rather than by increased sales at existing stores.

The company added nine new stores during the April–June quarter, taking its total store count to 424, as per Motilal Oswal. This is in line with recent quarters where DMart added 6 to 10 stores per quarter throughout FY25, and 28 stores in the January-March quarter, , according to the report.

In comparison, peers are expanding faster: V-Mart added 13 stores in Q1FY26, while Trent added only one store this quarter—though it had opened 130 stores in the preceding quarter, largely via Zudio and Westside.

Same-store sales growth continues to slow

Same-store sales growth (SSSG)—which tracks performance at stores open for at least a year—is expected to remain in the mid-to-high single-digit range for the June quarter. This follows a consistent decline over the past year: SSSG was 8.4% in Q1 FY25, 7.9% in Q2, 6.5% in Q3, and fell to 2.6% in Q4.

No visibility on DMart Ready’s strategy

DMart Ready, the company’s online grocery platform, currently operates in 25 cities. However, there have been no significant updates on its expansion, pricing, or strategy. Meanwhile, competitors such as Zepto, Blinkit, and Swiggy Instamart continue to expand their online delivery networks. The analyst report noted that any commentary from the company on its digital business will be closely watched.

Limited communication from management

Unlike other listed retail peers such as Trent, V-Mart, and Aditya Birla Fashion and Retail, Avenue Supermarts does not conduct quarterly earnings calls or provide detailed investor commentary. This means that investors must rely solely on the numbers released in the results to assess business performance and get a sense of the incoming CEO’s priorities.