Higher capex, competitive pricing key factors hurting DMart profitability

Margin pressure weighs on valuation of DMart stock

The Avenue Supermarts stock is down 18 per cent over the last year on worries that increasing competition, higher capex and volume-focussed lower pricing approach could aggravate margin pressures. These, coupled with worries on the pace of growth and hefty valuations, are expected to keep the stock under pressure.

A major worry for the Street is the intense competition from both offline and online retailers which could negate the advantage that Avenue’s DMart branded stores had hitherto enjoyed. The company indicated that the level of discounting from well-funded e-commerce players and store expansion by brick-and-mortar majors have risen significantly over the