Markets
What’s keeping Trent chicer than its competitors
Summary
- When many retailers have struggled to push their sales beyond a point, Trent has recorded 57% revenue growth in the June quarter.
MUMBAI : Trent Ltd’s shares have gained a whopping 232% in the past one year to ₹6,438 apiece. Investors are thrilled about the apparel retailer’s consistently high revenue growth. For instance, its year-on-year (y-o-y) standalone revenue growth stood at nearly 90% in FY22 on a favourable base, 99% in FY23 and 55% in FY24.
FY25 has begun well with 57% revenue growth in the June quarter (Q1FY25). That’s no mean feat, especially when many retailers have struggled to push their sales beyond a point. Broadly, other retailers have named a lower number of wedding days, heatwaves and the general elections as factors that have capped their growth this time. Note that Shoppers Stop Ltd's revenue was up 5% Q1; Go Fashion (India) Ltd’s increased by 16%; Page Industries Ltd’s grew 4%; Bata India Ltd’s dipped 1.4%; Reliance Retail’s core retail revenue rose 7%.
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“We acknowledge that companies such as Trent and Go Fashion possibly have lower salience on weddings than peers," said analysts from Kotak Institutional Equities. However, the analysts believe this is not the sole factor accountable for the dichotomy of Trent’s performance versus others. It could also be grabbing a share from rivals. “We believe Trent’s focus on merchandising and value-for-money offering is keeping demand buoyant and perhaps leading to share gains versus other brands/retailers," pointed out the 13 August Kotak report.
Store expansion is fuelling growth
Sure, vigorous store expansion over time is a factor boosting Trent's growth. Last quarter, it opened six Westside stores and 16 Zudio stores, taking the respective total count to 228 and 559 as of 30 June. Trent said its fashion concepts saw double-digit like-for-like growth in Q1FY25. Revenues from Trent’s value fashion format Zudio are estimated to have grown faster than Westside, its leading fashion concept. The vast store footprint aided Zudio’s growth. Despite higher Zudio presence in the sales mix, gross margin in Q1 expanded 170 basis points (bps) y-o-y to 46.2%. The emerging categories, including beauty and personal care, innerwear and footwear, are gaining traction and now contribute over 20% of standalone revenues.
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Post results, analysts have raised their earnings estimates for FY25 and FY26. For example, Motilal Oswal Financial Services has increased its profit after tax (PAT) estimates for FY25 and FY26 by 10% and 16%, respectively. “Based on strong revenue productivity, aggressive store additions, margin tailwinds from moderating raw material, and operating leverage, we estimate a compound annual growth rate of 41%/52% in revenue/PAT over FY24-26," said the broker.
Trent’s growth momentum looks poised to sustain, albeit the sharp rally in the shares suggests investors are capturing the brighter picture adequately, for now.
