Avenue Supermarts (DMart) faces cautious to bearish sentiment from brokerages following its Q3 FY26 results, despite delivering an earnings beat driven by significant margin expansion. The mixed reception highlights concerns over slowing growth momentum even as the retail giant demonstrated improved profitability metrics.

Q3 FY26 Financial Performance

DMart's October-December quarter results showed strong profit growth alongside revenue expansion, though same-store growth remained a key concern for analysts.

The company's EBITDA margins improved to 8.1% from 7.7% in the previous year, contributing to the earnings beat that surprised analysts despite revenue growth coming in below some estimates.

Citi Issues 'Sell' Rating on Growth Concerns

Citi has assigned a 'Sell' rating on DMart with a target price of ₹3,150.00 per share, expressing significant concerns about the company's growth trajectory and margin sustainability. The brokerage highlighted that same-store growth slowed to 5.6%, contributing to the 13% year-on-year revenue growth that fell short of their estimates, with staples deflation partially weighing on revenue performance.

While acknowledging that EBITDA and profit rose 20% and 18% year-on-year respectively, slightly beating estimates, Citi cautioned that margin sustainability remains a significant risk. The brokerage argued that gross margin expansion could be a one-off event, potentially linked to FMCG discounts or reduced discounting following GST changes. Citi also identified a concerning pattern where profit growth lagged revenue growth in 10 of the last 12 quarters, attributing this pressure to quick commerce competition and cost inflation.

Jefferies and Nuvama Maintain 'Hold' Stance

Jefferies maintained a 'Hold' rating with a target price of ₹4,050.00, acknowledging the margin-led earnings surprise while emphasizing concerns about moderating revenue growth and subdued same-store growth trends. The brokerage also pointed to execution risks surrounding store additions and the upcoming CEO transition as additional factors influencing their cautious outlook.

Nuvama retained a 'Hold' rating with a target price of ₹4,351.00, noting that profit growth was largely margin-driven and helped by reduced discounting strategies. While the brokerage flagged a revival in DMart Ready growth as a positive development, it adjusted FY26-27 estimates to reflect slower overall growth expectations and a sharper focus on margin improvement strategies.

Market Performance and Valuation

DMart stock closed at ₹3,807.00, gaining 0.45% ahead of the results announcement, valuing the company at approximately ₹2.48 lakh crore. Over the past year, the shares have delivered gains of around 8.5%, though the cautious brokerage calls suggest limited near-term upside potential despite the recent earnings beat.

Avenue Supermarts DMart has announced a major leadership restructuring, streamlining its senior management team to four executives effective February 1. In a stock exchange filing dated January 10, the company outlined this significant organizational change that marks a departure from its recent years of increasingly layered management structure.

New Leadership Structure

The restructured senior leadership team comprises four key executives with distinct category-focused responsibilities:

This represents the first major organizational change initiated by the board since Asawa assumed charge as chief executive, taking over from Ignatius Navil Noronha in March of the previous year. Asawa brings nearly 30 years of experience from consumer-packaged goods giant Unilever, having served in top roles across India, Europe, the UK, and Thailand.

Evolution of DMart's Management Structure

DMart's leadership structure has undergone significant changes since its 2017 listing. The company initially started with a nine-member team including separate roles for managing director, chief executive, and regional COOs. By 2025, this structure had expanded to a 14-member senior management team with dedicated COOs for west, north, and south India, along with specialized heads for food services and pharmacy verticals.

This evolution reflects DMart's growth trajectory, with market capitalization expanding from ₹37,000.00 crore at listing to over ₹2.47 trillion currently.

Strategic Rationale Behind Restructuring

According to executive search experts, leadership requirements evolve as companies scale through different growth phases. The streamlined structure focuses on DMart's three main revenue streams: FMCG, non-food, and apparel, with dedicated leadership for each segment. This approach prioritizes precision over scale at the top management level.

The restructuring comes as DMart faces intensified competition from quick commerce platforms, e-commerce-led pricing pressures, and evolving consumer expectations. These market dynamics are forcing large retail incumbents to rethink their speed, accountability, and decision-making structures.

Comparison with Industry Peers

DMart's lean leadership model contrasts sharply with more function-heavy structures adopted by listed peers:

• Vishal Mega Mart: Maintains broad, layered structure with multiple C-suite roles spanning finance, operations, IT, and HR, plus dedicated officers for different merchandising categories
• Spencer's: Follows expansive model with larger senior management including CEO, managing director, whole-time director, CFO, and various functional heads

Implementation Challenges and Risks

Leadership transitions carry execution risks, particularly for operationally disciplined companies like DMart. Key challenges include:

• Maintaining operational excellence during transition period
• Potential loss of institutional knowledge as long-serving leaders exit
• Ensuring seamless coordination across reduced management layers
• Adapting to competitive retail landscape while preserving execution strength

The success of this restructuring will depend on the new team's ability to maintain DMart's core operational advantages while enhancing agility and decision-making speed in response to evolving market conditions.