Avenue Supermarts FY25 results: Record revenue, margin pressures signal cautious optimism for DMart investors

Avenue Supermarts Limited (NSE: DMART, BSE: 540376), the operator of India’s most successful value retail chain DMart, reported a 16.7% year-on-year increase in standalone revenue for the financial year ended March 31, 2025. The topline touched ₹57,790 crore, underscoring the company’s aggressive footprint expansion and steady consumer traction, especially in Tier-2 and Tier-3 cities. However, margin compression, intensified FMCG sector competition, and rising labour costs tempered profitability growth, raising concerns among institutional investors.

This performance comes amid a broader shift in Indian retail, where organized players like Reliance Retail, Tata Digital, and Flipkart Wholesale continue to expand aggressively across both physical and online channels, forcing even established incumbents like DMart to recalibrate margins to defend their market share.

Why Did Avenue Supermarts’ Profit Margins Decline Despite Record Sales?

While revenue surged across both quarterly and annual periods, profitability growth lagged. For Q4FY25, Avenue Supermarts posted standalone revenue of ₹14,462 crore, with net profit rising marginally by 2.6% to ₹620 crore. EBITDA stood at ₹981 crore, up 4.4% year-on-year, but the margin shrank from 7.6% to 6.8%. PAT margin narrowed from 4.9% to 4.3%.

For FY25, net profit increased 8.6% to ₹2,927 crore, but EBITDA margins fell from 8.3% to 7.9%, and PAT margin slid from 5.4% to 5.1%. Basic earnings per share for the year improved to ₹44.98, up from ₹41.43 in FY24.

Management attributed the margin compression to three key factors: (1) heightened competitive pricing in the FMCG space, (2) entry-level wage inflation caused by labour shortages, and (3) continued investment in faster checkout systems, service turnaround, and store expansion.

How Did Avenue Supermarts’ Consolidated Results Compare to Standalone Performance?

On a consolidated basis, revenue for FY25 stood at ₹59,358 crore, rising from ₹50,789 crore in FY24. Consolidated EBITDA rose to ₹4,487 crore, and net profit reached ₹2,707 crore, up from ₹2,536 crore. However, margins again told a cautious story—EBITDA margin fell from 8.1% to 7.6%, while PAT margin declined to 4.6% from 5.0%.

The Q4FY25 consolidated performance followed a similar trajectory. Revenue rose 16.8% year-on-year to ₹14,872 crore, but net profit fell 2.1% to ₹551 crore, and EPS dropped to ₹8.47 from ₹8.66.

What Does Avenue Supermarts’ Store Expansion Strategy Signal?

The company added 50 new stores in FY25—including 28 in Q4—bringing its total count to 415 stores with 17.2 million square feet of retail area. The expansion remains focused on non-metro and semi-urban locations, which CEO Neville Noronha noted are delivering better like-for-like growth than urban centres with high DMart density.

Same-store growth for stores older than two years slowed to 8.1% in Q4FY25 from 10.3% in Q4FY24, hinting at maturity in some existing catchments. However, increased footfall across new stores helped cushion the impact, reinforcing the company’s ability to grow volume even in price-sensitive environments.

Noronha reaffirmed the company’s commitment to the “EDLC-EDLP” (Everyday Low Cost – Everyday Low Price) model, arguing that value consciousness among Indian shoppers remains strong even as per capita income rises.

How Is the E-Commerce Arm DMart Ready Performing?

DMart Ready, the company’s e-commerce vertical, saw strong traction in metro cities. Although several underperforming pick-up points were shut down during FY25, the home delivery model has more than compensated in terms of volume. The company called FY25 a “year of reset and review,” but also emphasized confidence in the segment’s scalability and consumer relevance.

Profitability for DMart Ready remains elusive, and Noronha acknowledged it may take time before the segment contributes positively to the bottom line. However, early user retention trends and repeat order frequency provide confidence about long-term viability, especially as urban Indian consumers become increasingly digital-first.

What Are Investors and Analysts Saying About Avenue Supermarts?

Market sentiment post-results has been subdued. On May 2, 2025, the company’s stock dropped by 3.35% to ₹4,059.20. Over the prior five trading sessions, DMart shares had declined by nearly 6%, reflecting investor apprehension over contracting margins.

The divergence between strong revenue growth and stagnant EPS growth has prompted several analysts to shift their stance from ‘Buy’ to ‘Hold’, at least in the short term. Brokerages have cited increased wage inflation, price-based competition from new entrants, and slow e-commerce profitability as medium-term overhangs.

According to reports from domestic brokerages, the current valuation—over 80x FY25 trailing EPS—is pricing in continued high growth. This makes margin disappointments more sensitive to stock price corrections.

What Are the FII/DII Activity Trends Telling Us?

In the March 2025 quarter, Foreign Institutional Investors (FIIs) cut their holdings in Avenue Supermarts from 8.96% to 8.18%. This reduction reflects a cautious stance amid margin pressure and stretched valuation multiples.

By contrast, Domestic Institutional Investors (DIIs) increased their stake from 8.1% to 9.2%. Mutual funds and insurance companies appear to be betting on the retailer’s long-term structural growth, particularly in underpenetrated markets.

This divergence reflects a classic value-versus-momentum trade: FIIs focusing on near-term earnings trajectory, while DIIs take a more fundamental view on store economics and cash flow generation.

Is Avenue Supermarts Still a Long-Term Buy?

Despite short-term concerns, Avenue Supermarts remains a structurally strong retail story. Its asset-light expansion model, disciplined capital allocation, and dominant footprint in value retail continue to provide it with high returns on capital employed (ROCE) and steady cash generation.

Analysts believe that once the cost structure stabilizes—especially with wage inflation and competitive intensity peaking—the company could return to margin expansion. DMart Ready, once scaled profitably, may offer operating leverage on the back of urban repeat shoppers.

The key risk remains further margin erosion or slowdown in store productivity. If EBITDA and PAT margins continue to compress, the current premium valuation may face downward pressure.

What’s Next for Avenue Supermarts in FY26?

With Anshul Asawa taking over operational control as CEO-designate, a leadership transition is underway. Neville Noronha will shift focus to strategic growth—especially fast-tracking new store openings and accelerating e-commerce capacity.

Future growth will likely come from a two-pronged strategy: deepening the presence in under-served towns while fine-tuning digital fulfilment models for urban India. Analysts expect FY26 to be a transition year—balancing investment-led growth with profit re-acceleration.

Sectorally, Indian retail is entering a high-churn phase with omnichannel models becoming the norm. Avenue Supermarts’ ability to protect gross margins while executing rapid rollout will determine its stock trajectory in the coming quarters.