Why Is Goldman Sachs Cautious on Avenue Supermarts Despite Strong Retail Base?
About Avenue Supermarts and Goldman Sachs’ Stance
Goldman Sachs has maintained its Sell rating on Avenue Supermarts, the parent company of DMart, while trimming the target price to ₹3,370 from ₹3,450 earlier. The brokerage’s view remains cautious as sales growth has disappointed despite operating on a relatively low base. The moderation in expansion pace and lack of meaningful acceleration in store openings have also contributed to a more conservative medium-term outlook.
🎯 Target Price: ₹3,370 (Previous: ₹3,450)
📉 Sales Growth: 15.4% YoY (Standalone)
⚙️ Store Expansion: No meaningful acceleration
📊 EPS Outlook: FY26–28 estimates cut by 2%
📈 Sales Forecast: FY26 sales growth moderated to 18% from 20%
Goldman Sachs’ analysis suggests that while DMart’s retail footprint remains among the strongest in India, its growth trajectory is losing some momentum. Weaker sales despite a soft base indicate that footfall recovery and consumer spend per ticket have not reached pre-pandemic levels across all markets. The brokerage expects the company to maintain operational prudence but sees limited near-term catalysts for re-rating.
Active investors often refer to Nifty Advice to track broader retail and consumption trends that often shape sentiment in discretionary stocks like Avenue Supermarts.
Goldman Sachs’ Key Observations
💡 Store Network: Limited new openings over recent quarters; management remains conservative in footprint expansion.
💡 Margins: Stable gross margins but limited operating leverage due to slower top-line growth.
💡 Valuation: FY26–28 EPS estimates trimmed by 2%; stock trades at a premium relative to peers despite modest growth visibility.
The firm expects Avenue Supermarts to continue focusing on efficiency improvements and operating cost control. However, the lack of volume-led acceleration implies that near-term profitability may stay range-bound. Moreover, a sustained uptick in store additions will be essential for any meaningful re-rating in the medium term.
Momentum traders track Bank Nifty Advisory Forecast for indications of liquidity flow that indirectly influence investor appetite for consumer-focused equities.
Valuation Perspective and Sector Outlook
📈 Industry Trends: Retail demand is stable but not accelerating; competition intensifying from online and hybrid models.
🛒 Consumer Sentiment: Urban demand growth moderating; rural demand recovery yet to materialize strongly.
🔍 Goldman’s View: Prefers diversified retail models and FMCG-linked plays over single-format grocery retailers.
Despite near-term caution, Avenue Supermarts remains one of India’s most efficient retailers with strong cash generation and inventory management. However, Goldman Sachs expects the current growth slowdown and high valuations to cap returns over the next few quarters.
Investor Takeaway
Goldman Sachs’ “Sell” stance highlights the importance of patience in the retail sector, where normalization of sales and store expansion is taking longer than expected. While DMart continues to benefit from brand strength and operating discipline, investors may prefer to wait for clearer signs of sustained demand acceleration before re-entering aggressively.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
