Analysts have downgraded the earnings estimates of retailer Avenue Supermarts for the current fiscal year and the next two years on margin pressure from higher input costs, operating expenses, and highest inflation on staples.

The company, which operates the DMart chain of hypermarkets, reported consolidated net profit of ₹723.7 crore, up 4.8 per cent on year, while revenue from operations rose 17.7 per cent to Rs 15,973 crore.

But margins were hit with expenses rising 18.5 per cent. Gross margins fell 16 basis points to 14.7 per cent, while EBITDA margin fell 63 bps to 7.6 per cent, though in actual terms EBITDA rose 8.7 per cent to Rs 1220 crore.

• Also read: DMart Q3 net profit rises around 5%, revenue soars 17.7%

Broker Prabhudas Lilladher said it cut FY25 earnings per share estimate by 5.7 per cent, FY26 by 7.6 per cent and FY27 by 9.1 per cent. It said the company had missed earnings estimates due to higher input and opex costs, higher inflation in staples that had an effect on demand for general merchandise and apparel as also impact of quick commerce and other online grocery platforms in the major cities.

The retailer posted 8.3 per cent like-to-like store growth and this contributed to the topline growth.

“We believe DMart’s margins would continue to be under pressure amid the high competition and management’s focus on market share followed by margins,” said Nuvama Institutional Equities. It said it was downgrading revenue and net profit estimates for FY25 by 0.5 and 11 per cent respectively, and for FY26 by 2.1 per cent and 17.4 per cent. It has also lowered the target price of the stock to ₹4,212 from ₹5,040 earlier.

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The retailer said in its earnings release that there was increased intensity in discounting in the FMCG category and there was a consequent impact to high turnover per square feet in the metro towns. But the impact of this was relatively lower in Q3 compared to Q2, it said.

It has also stepped up its pace of home delivery sales, to face the competition from quick commerce companies. “Our home delivery business now far exceeds our pick-up point sales contribution,” it said.

HDFC Securities, which cut the earnings estimates for the company in FY25 and FY26 by 2 per cent each, observed that the retailer may be close to the end of its earnings downgrade cycle.

The broker firm said with quick commerce players rapidly making inroads, maintaining its value proposition, improving assortment mix while maintaining operational efficiency would be key metrics.