Avenue Supermarts Q4 FY26 earnings call

Anshul Asawa, in his first call as CEO and MD, emphasized DMart's foundational principles of everyday low prices through low-cost operations as its moat. He highlighted the massive opportunity to scale this proven model into more cities, with store expansion being key. A significant priority is investing heavily in building management bandwidth and modernizing the technology and data stack to run tighter operations and use data more effectively across categories, stores, and supply chain.

For the year ended March 2026, Avenue Supermarts reported a turnover of approximately ₹67,000 crores. The consolidated sales grew by 16%, with PAT growing by 10%. The EBITDA margin stood at 7.8%, and cash generated from operations was ₹4,168 crores. Inventory days increased to 33.2 due to new warehouses, and ROCE was 17.1%, slightly lower than the prior year.

The company has made a conscious choice to double down on DMart Ready in 11 key cities, which account for the vast majority of its online business. The focus is on proving a sustainable and profitable e-commerce model by improving assortment, ensuring delivery within six hours for large basket shoppers, and enhancing user experience. Management clarified there are no plans to integrate DMart Ready with the physical store business due to differing customer needs and operational complexities.

DMart aims to increase its store base by around 15% annually, having opened 85 stores last year and reaching over 500 stores. While the company primarily focuses on buying land and building its own stores, it is open to long-term leasing where strategically sensible, especially in geographies where land acquisition is challenging. Currently, 68 stores are on long-term leases, with 15 of the 85 new stores last year being leased properties. The process of land acquisition and store construction typically takes 2-3 years.

Management acknowledged increased competition from quick commerce, particularly in dense metros, which impacts convenience shopping and smaller basket sizes. However, they remain confident in DMart's value proposition for large basket shopping, where customers save significantly (e.g., ₹1,500-₹2,000 on a ₹5,000 basket). They believe the Indian market still has vast untapped potential for organized retail, allowing various models to coexist and grow.

Gross margins expanded by 16 bps in FY26, and the company aims to maintain gross margins in the 14-15% range and net margins around 5% in the future. Employee costs increased by 27 bps, partly due to investments in capability building and the implementation of a new wage code. Management stated that throughput increases from existing stores help offset some inflationary pressures, and they do not micro-manage store-level P&L but focus on overall productivity.

Avenue E-commerce (DMart Ready) saw sales grow by 17% but experienced a significant EBITDA decline of 43%, resulting in a net loss of ₹307 crore. Align Retail, the grocery packing business, grew by 16.5% with PAT growth of 24%. Avenue Food Plaza, which handles fast and ready food, grew by 35.5% and returned a PAT of 9%, indicating a turnaround from previous losses due to expansion.