Majority of the analysts who track Radhakishan Damani-promoted Avenue Supermarts, the parent of hypermarket chain D-Mart expect the stock to fall anywhere between 8-20 percent over the next 12 months. They cite margin challenges and a continued slowdown in the General Merchandise business as the key factors behind their bearish stance.

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However, some of them have mentioned that the General Merchandise improving towards the pre-pandemic levels is a key positive and may lead to an improvement in growth.

Avenue Supermarts reported a net profit of Rs 658 crore for the June quarter, which was lower than the CNBC-TV18 poll of Rs 750 crore. While revenue was in-line with expectations, EBITDA and margin were a miss.

Brokerage firm UBS believes that the weak product mix continues to impact Avenue Supermart's gross margin. It also mentioned that the Compounded Annual Growth Rate (CAGR) for sales per square feet, over the last four years, remains in negative territory. Although the management highlighted that Gross Margin is recovering and moving towards pre-pandemic levels, UBS expects it to remain under pressure in the near-term due to a weak product mix. The brokerage has maintained a sell rating on the stock with a price target of Rs 3,700.

Jefferies highlights that the general merchandise and apparel mix improved sequentially and that the general merchandise mix nearing pre-Covid levels is a key positive. It also mentioned that margin pressure resulted in the company's operating profit or EBITDA growing by only 3 percent year-on-year. It has a hold rating on the stock with a price target similar to UBS, of Rs 3,700.

However, the lower demand for better-margin general merchandise and apparel categories remains a key challenge for D-Mart, according to Morgan Stanley. The brokerage also highlighted that the contribution of GMA is slowly trending towards pre-pandemic levels. It has also maintained an equalweight rating on the stock with a price target of Rs 3,786.

A bullish call on D-Mart's parent comes from Macquarie, who wrote in its note that the commentary of general merchandise sales recovering towards pre-pandemic level boosts their view of this weakness being more cyclical than structural. It continues to expects the company's Earnings per Share to report strong growth on improving general merchandise sales and no material change in competitive intensity. Macquarie has maintained its outperform rating on the stock with a price target of Rs 4,450, which is a 15 percent upside from current levels.

Shares of Avenue Supermarts are down 5.7 percent on a year-to-date basis. 40 percent of the 25 analysts who track Avenue Supermarts have a sell recommendation on the stock, while 32 percent and 28 percent of those tracking the stock have a buy and hold rating respectively.