THEBUSINESSBYTES BUREAU
MUMBAI, NOVEMBER 4, 2026
Reliance Retail is prioritising long-term growth over near-term earnings,
undertaking an extensive operational reset and accelerating its omni-channel
expansion in what analysts see as an investment year that could pave the way
for a sharp improvement in profitability from FY28.
Reliance Retail Ventures Ltd (RRVL), the country's largest retailer, is
absorbing short-term margin pressures to strengthen its hyper-local supply
chain, expand its digital ecosystem and improve store-level productivity, with
analysts expecting the benefits of these investments to become increasingly
visible over the next two financial years.
For the second quarter of FY27, core net retail revenue, adjusted for the
consumer brands demerger, grew 5.8 per cent year-on-year to Rs 80,220 crore.
However, operational EBITDA declined 11.1 per cent to Rs 5,886 crore, with
margins contracting to 7.3 per cent amid input-cost inflation absorbed by the
company, aggressive investments in quick commerce and the shift of the festive
calendar entirely into the third quarter.
Leading global and domestic brokerages have described FY27 as a
deliberate reset and investment phase, arguing that the company's expanding
digital infrastructure, disciplined store rationalisation and improving supply
chain efficiencies could unlock significant operating leverage from FY28
onwards.
J.P. Morgan said Reliance Retail was significantly ramping up its online
operations, with a particularly strong competitive positioning in smaller
cities, and expected the digital business to become accretive to the bottom
line in FY28.
The brokerage expects EBITDA growth to improve in the second half of FY27
as revenue momentum strengthens on the back of inflation and festive demand,
while year-on-year margin contraction moderates on a favourable base. It also
believes the company's valuations remain comfortable.
Bank of America Global Research said management had reiterated that its
retail strategy remained unchanged, with the company building its online
presence in a disciplined manner rather than pursuing short-term earnings
growth.
The brokerage noted that Reliance Retail was consciously trading near-term
profitability for the creation of a stronger digital platform. Its focus on
expanding the dark-store network is expected to yield financial benefits as
utilisation levels improve, eventually making the infrastructure accretive to
the bottom line.
CLSA Research described FY27 as a reset year during which Reliance Retail
would consolidate its offline operations while strengthening its digital and
quick-commerce businesses. The brokerage expects these initiatives to pave the
way for a material increase in retail EBITDA over the next two years.
It added that continued streamlining of operations and a recovery in
growth momentum over the coming quarters could provide significant upside to
the company's stock.
Kotak Institutional Equities and Prabhudas Lilladher similarly noted that
the company's immediate priority was to scale up its online operations with
financial discipline. The benefits of this investment are expected to emerge in
FY28 and FY29 through higher customer lifetime value, improved monetisation,
better productivity and stronger cash generation.
The operational restructuring is already becoming visible across Reliance
Retail's physical network. The company exited 525 underperforming locations
while opening 303 stores in high-growth catchments, resulting in a net
reduction of 222 stores and taking its overall store count to 19,947.
Despite the rationalisation, its registered customer base expanded 10 per
cent year-on-year to more than 400 million, underscoring the scale of its
consumer franchise.
Its digital grocery platform, JioMart, recorded 42 per cent year-on-year
growth in business-to-consumer online grocery operations, while units per order
increased 24 per cent. The platform is leveraging Reliance Retail's extensive
physical infrastructure of more than 5,000 stores spread across over 1,000
towns to strengthen last-mile fulfilment and deepen its reach.
The electronics business also demonstrated resilience, with like-for-like
sales rising 8 per cent and distribution revenue increasing 20 per cent. In
Fashion and Lifestyle, the contribution of higher-margin own brands expanded by
710 basis points, supporting the company's efforts to improve its product mix
and profitability.
Analysts believe Reliance Retail's extensive store network provides a
structural advantage in scaling digital commerce, as existing fixed store costs
can increasingly support delivery and fulfilment operations without requiring a
proportionate increase in incremental infrastructure expenditure.
With the festive shopping season shifting into the third quarter, improving demand, higher digital volumes and better utilisation of dark stores could provide a near-term boost to operating performance.
The broader investment thesis, however, rests on the company's ability to convert its massive offline reach and growing digital customer base into sustainable earnings growth. While FY27 may remain a period of margin pressure as investments gather pace, analysts expect the combination of supply chain efficiencies, higher store productivity, improved monetisation and operating leverage to drive a meaningful acceleration in profitability over FY28 and FY29.
