DMart Q2: Sales Up 18%, Profit Up 7.6%. Where the Margin Went.
DMart's sales grew 18.4% in the September quarter, to ₹19,206 crore. Its profit grew 7.6%, to ₹804 crore. The gap is not a price war: the gross margin barely moved. It is the cost of growing faster. DMart added 85 stores last year against 40 to 50 in earlier years, and depreciation and interest are rising with them. Borrowings went from ₹965 crore to ₹2,629 crore in six months. Read for moat and margin: the low-price engine is working; the margin is paying for expansion.
What the filing says
| Standalone | Q2 FY26 | Q2 FY27 | Change |
|---|---|---|---|
| Revenue | ₹16,219 crore | ₹19,206 crore | +18.4% |
| EBITDA | ₹1,230 crore | ₹1,403 crore | +14.1% |
| EBITDA margin | 7.6% | 7.3% | |
| Profit after tax | ₹747 crore | ₹804 crore | +7.6% |
| Profit margin | 4.6% | 4.2% | |
| Stores added in the quarter | 8 | 15 |
Sources: [PR], [PR25].
- Existing stores sold more. Stores two years and older grew 9.5%, against 6.8% a year ago ([PR]).
- 518 stores now, with 21.4 million sq ft of retail area, against 17.9 million sq ft a year ago ([PR], [PR25]). That is about 20% more space (our arithmetic).
- Consolidated, which adds the e-commerce arm and other subsidiaries, profit was ₹743 crore, ₹61 crore less than standalone (our arithmetic), on revenue of ₹19,644 crore ([PR]).
Where the margin went
Revenue rose ₹2,987 crore. Here is each cost line as a share of revenue (our arithmetic from [RES]):
| Share of revenue | Q2 FY26 | Q2 FY27 | Change |
|---|---|---|---|
| Cost of goods sold | 85.76% | 85.85% | +0.09 |
| Gross margin | 14.24% | 14.15% | −0.09 |
| Employee costs | 2.04% | 2.06% | +0.02 |
| Other expenses | 4.62% | 4.77% | +0.16 |
| Operating margin (company's ratio) | 7.58% | 7.31% | −0.27 |
| Depreciation | 1.41% | 1.49% | +0.09 |
| Finance costs | 0.20% | 0.31% | +0.11 |
| Other income | 0.20% | 0.12% | −0.08 |
| Profit before tax | 6.18% | 5.62% | −0.56 |
- Prices held. The gross margin moved by less than a tenth of a point. DMart is not buying growth with discounts.
- About half the fall is above the operating line. Other expenses took 0.16 points, the gross margin 0.09 and wages 0.02: 0.27 in all. The CEO: "Wage inflation at entry-level has led to a marginal increase in operating expenses." ([PR])
- The other half is the cost of new stores. Depreciation rose 26%, to ₹287 crore. Finance costs rose 87%, to ₹59.55 crore. Other income fell. Together they took another 0.28 points.
Faster expansion, and borrowing for it
| Year | Stores added | Stores at year end |
|---|---|---|
| FY22 | 50 | 284 |
| FY23 | 40 | 324 |
| FY24 | 41 | 365 |
| FY25 | 50 | 415 |
| FY26 | 85 | 500 |
| H1 FY27 | 18 | 518 |
Sources: [AM], [IP].
- The pace changed in FY26: 85 stores in one year, after four years of 40 to 50.
- DMart now borrows. Current borrowings were ₹2,628.66 crore on 30 September 2026, against ₹965.27 crore on 31 March 2026 ([RES]). In the half year it raised ₹2,600 crore of commercial paper and repaid ₹1,300 crore ([RES]).
- Capital spending rose: ₹2,089.82 crore in the half year, against ₹1,704.84 crore a year earlier ([RES]).
- Still small against its equity. DMart's own chart puts total debt, lease liabilities included, at ₹4,079 crore against equity of ₹27,290 crore, a ratio of 0.15. A year and a half earlier, at March 2025, debt was ₹693 crore ([IP]).
Five years of the margin
| Year | Revenue (₹ crore) | EBITDA margin | Profit margin | Like-for-like growth |
|---|---|---|---|---|
| FY22 | 30,353 | 8.2% | 5.3% | 16.7% |
| FY23 | 41,833 | 8.7% | 6.1%* | 24.2% |
| FY24 | 49,533 | 8.3% | 5.4% | 9.9% |
| FY25 | 57,790 | 7.9% | 5.1%* | 8.4% |
| FY26 | 66,968 | 7.8% | 4.8% | 8.1% |
| H1 FY27 | 37,550 | 7.8% | 4.6% | not given for the half |
Sources: [AM], [IP]. *FY23 and FY25 include one-off tax benefits, so the company says they are not comparable.
- Sales more than doubled in four years.
- The EBITDA margin has slipped every year since FY23: 8.7%, 8.3%, 7.9%, 7.8%.
- The profit margin has slipped faster, to 4.6%, because depreciation and now interest sit below EBITDA.
- Sales per square foot stopped rising. ₹33,896 in FY25, ₹33,422 in FY26, the year of 85 new stores ([AM]). New stores take time to fill.
Against other retailers
| Company | Period | Revenue growth | Same-store growth | Margin |
|---|---|---|---|---|
| DMart | Q2 FY27 | +18.4% | 9.5% | EBITDA 7.3% |
| Vishal Mega Mart | Q1 FY27 | +18.7% | 10.0% | Operating EBITDA 10.4%** |
| Trent (standalone) | Q2 FY27 | +23% | not given | not given |
| V-Mart Retail | Q2 FY27 | +18% | 3% (11% adjusted for the festive shift) | not given |
| Reliance Retail | Q1 FY27 | +7.4% as reported (+11.6% adjusted for a demerger) | not given | EBITDA 7.9% |
Sources: [PR], [VMM], [TRENT], [VMART], [RIL]. **Before lease accounting and ESOP charges, so not like for like with DMart's.
- DMart's growth is in line with the value retailers, and ahead of Reliance Retail, whose gross revenue grew 7.4% as reported and 11.6% adjusted for the demerger of its consumer brands business ([RIL]).
- Its margin is the thinnest of those that report one. That is by design: it sells mostly food and daily goods (about 57% of sales is food, [IP]) at low prices.
- The festive season moved. V-Mart says Navratri began on 11 October this year against 22 September last year, shifting festive sales out of the quarter ([VMART]). DMart's 9.5% same-store growth came without that help. DMart's filing does not mention it.
Moat and margin
Focus moat: cost advantage. DMart's promise is the lowest everyday price. It can keep that promise only if its own costs are the lowest. The evidence:
- Present. The gross margin held at about 14.2% while sales grew 18%. Staff cost 2.1% of sales and other expenses 4.8%. Older stores grew 9.5%, faster than a year ago.
- Under watch. Sales per square foot dipped in FY26. If the 85 new stores fill up as older ones did, that reverses. If they don't, the cost advantage is being spread thinner.
Verdict on the moat: holding. Customers are buying more at the same margin. Nothing in this quarter says the price promise is slipping.
The margin. Down for the fourth year running. This quarter it has two parts:
- Costs above the operating line, mainly other expenses: 0.27 points.
- The cost of growing faster: depreciation, interest and lower treasury income, 0.28 points.
The second part is new. DMart used to fund its stores from its own cash. It now borrows.
Verdict on the margin: weaker, and the reason has changed. It used to be wages and mix. Now it is also the price of building 85 stores a year.
MoatSCOREs (Moat Screener, consumer services, all first-pass): Vishal Mega Mart 5.22, Avenue Supermarts 5.15, Aditya Birla Fashion and Retail 5.15, Trent 4.97 ([MS]). All are AMBER+. V-Mart Retail is not yet scored.
The bear case
- Profit is growing at less than half the pace of sales.
- The margin has fallen four years in a row.
- Borrowings nearly tripled in six months, from ₹965 crore to ₹2,629 crore (our arithmetic on [RES]).
- Sales per square foot fell in FY26.
- The consolidated profit is ₹61 crore lower than standalone, so the subsidiaries, which include e-commerce, lose money between them.
- Cash from operations was ₹599 crore in the half year, against capital spending of ₹2,090 crore ([RES]). Inventories rose by ₹1,388 crore, and borrowing filled the gap (our reading of the cash flow statement).
The case for
- Same-store growth accelerated, in a quarter without the festive season.
- The gross margin held, so growth isn't being bought.
- Debt is 0.15 times equity, on DMart's own measure.
- Profit plus depreciation exceeds capital spending: ₹2,298 crore in the half year on DMart's measure ([IP]), against ₹2,090 crore. Actual cash from operations was lower: see the bear case.
What to watch
- Q3 FY27, which holds this year's festive season: does same-store growth stay near 10%?
- Borrowings at 31 December and 31 March.
- Stores added in the second half. FY26's 85 were back-loaded.
- Sales per square foot for FY27.
- The gross margin: any fall would mean the price promise is costing more.
Sources
- [PR] Avenue Supermarts press release, Q2 FY27, 10 Oct 2026 · [RES] Results with balance sheet and cash flow · [IP] Investor presentation, H1 FY27 (NSE)
- [AM] Presentation for the Analyst/Investor Meet 2026, 24 Jul 2026 · [PR25] Press release, Q2 FY26, 11 Oct 2025 (NSE)
- [VMM] Vishal Mega Mart press release, Q1 FY27 · [TRENT] Trent update, Q2 FY27 · [VMART] V-Mart Retail business update, Q2 FY27 · [RIL] Reliance Industries media release, Q1 FY27 (NSE)
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from the companies' own filings, read from the primary documents on 11 October 2026; cost ratios, the gross margin and growth in store area are our arithmetic, labelled as such. MoatSCOREs read live from the Moat Screener on 11 October 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
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