Avenue Supermarts (DMart) shares fell 3 percent in early trade on Monday after the retailer's fiscal second quarter earnings disappointed on profitability despite an improvement in revenue growth and consumer demand.

The stock was trading around Rs 3,411, making it one of the top losers on the BSE 500 and NSE 500 indices. DMart shares had also declined 1.9 percent on Friday, ahead of the results. The stock has fallen 5.4 percent so far in 2026, compared with a 13.9 percent decline in the Nifty 50.

Brokerages remained divided on DMart's outlook, with CLSA projecting substantial upside, while Citi maintained its bearish stance amid concerns over weakening store productivity, rising costs and quick-commerce competition.

DMart Q2 results: Revenue rises 18%, margins contract

Avenue Supermarts reported an 8.5 percent year-on-year increase in consolidated net profit to Rs 743.5 crore for Q2 FY27, while revenue rose 17.8 percent to Rs 19,644 crore. EBITDA increased 15 percent to Rs 1,394 crore, although the margin contracted to 7 percent from 7.3 percent a year earlier. Like-for-like (LFL) growth improved to 9.5 percent, while the retailer added 15 stores during the quarter, taking its total network to 518 outlets.

CLSA sees 63% upside; Jefferies cuts target

CLSA maintained its high-conviction Outperform rating with a target price of Rs 5,723, implying approximately 63 percent upside from Friday's close. The brokerage said LFL growth of 9.5 percent and gross margin of 14.15 percent were broadly in line with expectations. However, EBITDA margin contracted 28 basis points due to minimum wage hikes, while profit growth lagged EBITDA growth because of higher depreciation and finance costs.

Jefferies retained its Hold rating but cut its target price to Rs 4,000, citing profitability concerns despite healthy demand. The brokerage flagged a higher food mix, weaker gross margins, wage inflation and inventory build-up. It also noted softer store productivity and EBITDA per store falling to a multi-quarter low. Jefferies reduced its earnings estimates by 2-3 percent.

Motilal Oswal flags earnings miss despite stronger growth

Motilal Oswal maintained its Neutral rating with a target price of Rs 3,925. The brokerage highlighted revenue growth accelerating to 18 percent in Q2 from 15 percent in Q1, while LFL growth improved to 9.5 percent from 5.5 percent. Store additions also increased to 15 from three in the preceding quarter.

However, EBITDA and net profit missed estimates by 3 percent and 7 percent, respectively. EBITDA margin contracted around 30 basis points due to weaker gross margins and higher retailing costs,  including entry-level wage inflation.

Citi retains Sell, cuts target to Rs 3,250

Citi maintained its Sell rating and reduced its target price to Rs 3,250, citing persistent profitability pressures and growing competition from quick-commerce platforms. The brokerage noted that standalone EBITDA and net profit missed estimates by 8 percent and 12 percent, respectively, despite 18 percent revenue growth. Revenue per square foot increased just 1.5 percent year-on-year, while EBITDA and profit before tax per square foot declined 2.2 percent and 7.7 percent, respectively.

Citi also flagged deteriorating cash flow, with negative free cash flow widening to Rs 1,640 crore in H1 FY27 from Rs 320 crore a year earlier. Gross debt increased to Rs 2,630 crore from Rs 970 crore at the end of FY26. The brokerage said that profit growth had lagged revenue growth in 11 of the past 14 quarters, reflecting quick-commerce competition, lower other income and higher interest costs. It cut FY27-29 earnings estimates by 2-4 percent.