Shares of Avenue Supermarts Ltd., the operator of the D-Mart hypermarket chain, fell sharply by 9% on Monday, October 14, marking their largest single-day decline since January 2019. The steep drop came in response to a downgrade from global brokerage firm JPMorgan, which revised its rating from ‘Overweight’ to ‘Neutral’. This downgrade has raised investor concerns, prompting a significant sell-off in the stock.
JPMorgan also cut its price target for D-Mart, reducing it from ₹5,400 per share to ₹4,700. Despite the downgrade, the revised price target still implies a potential upside of about 3% from Friday’s closing price. The firm cited weaker-than-expected second-quarter performance and slowing revenue growth as reasons for the downgrade, signaling that the company’s near-term outlook may be under pressure.
One of the key challenges highlighted in JPMorgan’s report was the slowing of like-for-like (LFL) sales, a critical metric for assessing the company’s performance. Avenue Supermarts’ revenue growth has been hampered by softer sales figures, particularly in its larger stores located in metro cities. These stores are feeling the heat from rising competition in the online grocery space, which has started to eat into traditional brick-and-mortar market share.
Increased investments in technology and operations to keep up with online competitors have also weighed on the company’s operating margins. As D-Mart expands its efforts to compete with e-commerce grocery platforms, these costs are expected to continue impacting profitability in the short term.
The press release accompanying the results noted that the slowdown in same-store sales growth (SSSG) was more pronounced than anticipated. The clear impact of online grocery formats is adding additional pressure on Avenue Supermarts, raising questions about how the company will navigate this shifting landscape in the retail sector.
