DMart Shares Plummet 9.3% Amidst Growing Competition

DMart shares slump on earnings miss

Shares of Avenue Supermarts, DMart’s parent company, dropped by 9.3% in early Monday trading, reaching a low of Rs 4,143.60 on the Bombay Stock Exchange (BSE). This decline followed downgrades from several brokerage firms, with some lowering their target price for the stock to as little as Rs 3,702. The disappointing performance was tied to DMart’s second-quarter (Q2) earnings, which, despite an 8% year-on-year profit increase, saw a more than 12% decline in profit after tax compared to the previous quarter. The company reported total Q2 revenue of Rs 14,050.32 crore, a 14% increase from Rs 12,307.72 crore last year, but this fell short of investor and analyst expectations.

A major factor weighing on DMart is the growing competition from the “quick commerce” sector, which includes fast delivery services from online grocery platforms. These services are particularly impacting DMart’s presence in metro cities.

Several major brokerage firms shared their views on DMart’s Q2 results: JPMorgan downgraded the stock from Overweight to Neutral and cut its target price from Rs 5,400 to Rs 4,700. They cited rising costs and increasing competition from online grocery platforms, especially in larger cities, as key challenges. Additionally, the slower growth rate of its existing stores has negatively affected DMart’s profit margins.

Morgan Stanley adopted a more cautious stance, downgrading DMart’s stock from Overweight to Underweight and significantly lowering the target price from Rs 5,769 to Rs 3,702. The firm pointed out that DMart’s sales and profit margins were weaker than anticipated, and the increasing competition from online grocery platforms may challenge the company’s ability to meet its 20% growth target.

Nuvama maintained its Hold rating on DMart but reduced the target price from Rs 5,183 to Rs 5,040. They highlighted weaker store performance in Q2, with sales from existing stores increasing by just 5.5%, down from 9.1% in the previous quarter. Additionally, DMart’s online grocery service, DMart Ready, experienced slower growth, further disappointing investors.

DMart Shares Plummet 9.3% Amidst Growing Competition Prabhudas Lilladher downgraded DMart from ‘Accumulate’ to Hold and lowered its target price from Rs 5,168 to Rs 4,748. They pointed out that DMart’s sales, especially in metro cities, were being impacted by competition from online grocery platforms, resulting in slower growth for its stores. Additionally, the company’s costs increased as it opened six new stores during the quarter.

For retail investors, the message is clear: DMart’s performance is being weighed down by rising competition from quick-delivery grocery services and increasing costs. Although the company is still growing, it’s falling short of expectations, leading to broker downgrades. If you currently hold DMart shares, it may be wise to monitor how the company addresses these challenges in the coming quarters before making any major decisions.

For potential investors, it’s important to watch how DMart competes with online grocery platforms and manages its costs effectively. As of 10:55 am, DMart shares were trading 7.86% lower on the BSE at Rs 4,212.90.