Trent gains 7% on healthy revenue growth in December quarter

Shares of Trent rallied up to 7 per cent to Rs 1,324.95 on the BSE in Thursday’s intra-day trade in an otherwise range-bound market after the company reported strong revenue growth in December quarter (Q3FY23). In comparison, the S&P BSE Sensex was up 0.05 per cent at 60,691 at 10:45 AM.

The company said its consolidated revenues for Q3FY23 at Rs 2,460 crore grew by 53 per cent over Q3FY22 and 185 per cent over Q3FY20. Profit after tax was up 21 per cent year-on-year (YoY) to Rs 161 crore.

Trent is part of the Tata Group and operates a portfolio of retail concepts. The primary customer propositions of Trent include: Westside, one of India's leading chains of fashion retail stores, Zudio, a one stop destination for great fashion at great value and Trent Hypermarket, which operates in the competitive food, grocery and daily needs segment under the Star banner.

On higher revenue growth during the quarter, Trent said, the Star business with tight footprint stores and focus on fresh foods & own brands offering continue to witness improved customer traction with growing sales densities. Given the increasingly positive economics at store level, the management is optimistic that the company has a differentiated & scalable model to pursue. Consequently, the management sees Star as a key and additional growth engine in its portfolio.

Meanwhile, gross margins for the quarter declined 590 bps YoY to 45.4 per cent possibly on account of a sharp rise in share of Zudio format, which has lower margin compared to Westside. Higher opex cost on account of new store openings resulted in EBITDA margins declining by 620 bps YoY to 15.5 per cent on a very high base, ICICI Securities said.

According to the brokerage firm, Zudio continues to gain market share in the value fashion space with robust growth. It has been the new growth engine for Trent given its scalable business model (one-third size of Westside format) and strong acceptance in Tier II/III cities with sharp price point assortment (ASP < | 500). Trent has, over the years, consistently outperformed peers given the strong brand patronage (Westside, Zudio, Star, Zara) and proven business model (Westside: 100 per cent private label), ICICI Securities said in a note.

In past three months, Trent has underperformed the market by falling 12 per cent, as compared to 0.53 per cent decline in the S&P BSE Sensex. However, in past one year, the stock has rallied 24 per cent, as against 3.8 per cent rise in the benchmark index.