Muted Consumer Sentiment or Growth Fatigue? What's Behind Trent's Slowing Growth

Tata Group's fashion and lifestyle retail unit Trent has continued on its revenue growth slowdown path in the second quarter of the financial year 2025-26 (FY26). The firm reported just 17% year-on-year topline growth in the quarter ending September 30, 2025. Just a year ago, the firm behind stores like Westside and Zudio saw revenue growing at 39.6% YoY. But since then, it has declined in each quarter.

The company, in the investors’ presentation for Q2 FY26, said, "The consumer sentiment in the second quarter was relatively muted and we also witnessed headwinds given unseasonal rains. The quarter also saw the transition to the new GST regime."

However, HDFC Securities Institutional Equities in a note on November 10 claimed it’s a sign of "growth fatigue," which is increasingly visible across formats in Trent.

The Mumbai-based brokerage, earlier in a report in June, had "suspected" that Trent's brand Westside "is showing signs of customer fatigue, Zudio’s efficiency is optimal, and success in Star (Joint Venture with British retailer Tesco) is not a cinch."

Following its quarterly results announcement on Friday, Trent shares plunged 7.4% to ₹4,282 on the BSE on Monday.

Trent to Continue Store Addition

However, the company has doubled down on its massive expansion push by adding 13 net new stores for Westside, taking the total store count to 261. Zudio added 40 net store openings in Q2 FY26 to reach 806 stores. Trent launched a new format, Burnt Toast, during the quarter, which helped increase the other fashion format’s store count by 5 QoQ to 34 during the quarter.

Star Bazaar added 3 new stores while closing 4. The JV reported a revenue decline of 2% YoY in Q2FY26, primarily impacted by ongoing store upgrades undertaken during Q2 and H1FY26.

But despite this expansion, Trent's employee expenses were flat YoY at ₹2,873 crore compared to ₹2,880 crore in Q2 FY25. Management attributed this to tech investments over the past few years, which have helped it reduce manpower at stores.

This also helped the company cut costs, keeping its pre-Ind AS EBITDA margin steady at 12.2% this quarter, compared to 12.3% a year ago. The reported EBITDA margin rose by 134 basis points year-on-year to 17.2%. The firm’s profit before tax and adjusted profit after tax grew 3.7% and 6.5% year-on-year to ₹576 crore and ₹451 crore, respectively. Core working capital days improved to 20 in the first half of FY26 from 25 in the same period last year, while capital expenditure stood at ₹1,019 crore.

The company's online channels (Westside.com and Tata Neu) grew 56% YoY, contributing over 6% of total revenues.

Near-Term Pressure

The company says it will continue to focus on expanding its market reach while enhancing the quality of its store portfolio. It is consciously increasing store density across key markets and undertaking selective consolidation to improve customer experience and operational efficiency. Expansion into Tier 2 and Tier 3 cities, along with emerging urban catchments, presents significant long-term opportunities, though growth trajectories may vary across markets.

"This shall be a positive strategy in the long term; however, in the short to medium term, the larger stores shall take longer to mature, thus impacting the SSSG. This store expansion shall also put some pressure on margins," said Systematix Institutional Equities in a note on November 8.

It added that they expect revenue, EBITDA, and PAT to grow at 21.8%, 22.8%, and 18.6% CAGR, respectively, between FY25 and FY28. They have cut revenue estimates by 5–7% and profit estimates by 12–15% for FY26–FY28 due to slower expected growth and lower operating leverage.

"Operating margins are projected to stay around 16.5–16.8% over FY26–FY28. Westside’s revenue is expected to grow about 8.5% annually with 15–20 new stores each year, while Zudio’s revenue is estimated to rise 28% annually, supported by around 140–150 new store openings per year," the brokerage said.

Analysts at Nuvama also cut their FY26 revenue, EBITDA, and PAT estimates by 3.6%, 4.1%, and 9.5%, and for FY27 by 3%, 3.1%, and 9.8%, respectively.

However, Motilal Oswal Financial Services continues to like Trent for "its robust footprint additions, strong double-digit growth, long runway for growth in Star (presence in just 10 cities), and potential scale-up of emerging categories (Beauty, Innerwear, Footwear, and LGDs)."

"However, revenue growth acceleration remains a key trigger," the brokerage added in a note on November 10. They expect standalone revenue, EBITDA, and PAT to grow at 17%, 20%, and 14% CAGR between FY25 and FY28.