Shares of Avenue Supermart, one of India’s leading retail superstore chains, opened nearly 4 % gap down on Monday after the company declared its Q2FY27 results on Saturday. The shares were consistently under pressure since the company announced its Q2 business updates earlier this month. The shares have fallen more than 11 % after the company released the business updates for Q2FY27. The company delivered robust double‑digit revenue and operating profit growth for the quarter ended September 2026, with net profit also jumping in high single digits for the period under review.

Consolidated revenue from operations stood at ₹19,644 crore, up from ₹16,676 crore in the same period last year. On a standalone basis, revenue stood at ₹19,206 crore, up 18 % YoY from ₹16,219 crore in the same period last year. During the quarter, the company added 18 new stores, taking the total store count to 518 from 500 at the end of FY26. EBITDA for the quarter stood at ₹1,403 crore, up 14.1 % YoY from ₹1,230 crore. The EBITDA margin contracted to 7.3 % from 7.6 % last year. Bottom line grew 7.6 % YoY to ₹804 crore from ₹747 crore in the quarter ended September 2025.

Although EBITDA grew 14.6 % YoY, the EBITDA margin contracted by 30 bps to 7.3 % versus 7.6 % last year. Profitability margins also declined by 40 bps to 4.6 % in the same period last year, compared to 4.2 % in Q2FY27. Management attributes the decline to wage inflation at the entry level, which has marginally increased operating expenses and dented some margins for the quarter. The high‑margin apparel business remains stagnant at 23.4 % of total business, while the low‑margin food segment contributes more than 57 % as of H1FY27. This contraction signals pressure on cost control and margin sustainability.

Inventory days increased from 33.2 to 36.1 days in the quarter ended September 2026. The slower conversion cycle may lead to a poorer cash conversion cycle and higher working capital requirements. Holding more inventory at stores slows the conversion of goods, potentially impacting liquidity and increasing the need for additional working capital to finance the longer inventory holding period. This trend could strain cash flows and affect the company’s ability to fund new store openings.

The return on net worth fell to 6.6 % as of H1FY27, down from 13.5 % in Q1FY27 and 6.8 % in H1FY26. This marks the lowest level in three years, indicating that the company is generating little profit for every rupee of equity invested. It also suggests that new investments are not delivering the same returns as previous ones, pointing to poor capital allocation and efficiency on the capital employed. The decline may raise concerns among investors about the sustainability of earnings growth and profitability overall.

After the Q2FY27 results, global brokerage houses’ views are divided. Bernstein remains optimistic, citing the like‑for‑like store growth of 9.5 % as evidence of resilience in the value‑grocer model. Jefferies maintains its view but notes that profitability growth disappointed due to higher‑than‑expected wage inflation. CITI, however, points out that profit growth has lacked revenue growth in 11 of 14 quarters, citing stiff competition from quick‑commerce companies, lower other income, and higher interest expenses. These mixed assessments reflect differing expectations about margin recovery and competitive pressures.