Shares of Trent slumped over 4% on April 30 as investors dumped the stock after the company’s revenue growth for the March quarter showed signs of a significant slowdown.
The Tata Group company’s revenue rose 28% on year to Rs 4,217 crore in the March quarter, the slowest pace of growth for Q4 since FY21. The moderated revenue growth brings out concerns over faltering urban consumption trends as a slew of Indian as well as global apparel brands struggle to rake in strong sales numbers in recent times.
Meanwhile, the company also enjoyed the benefit of a one-time gain of Rs 543 crore in the year ago period, adjusting for which, its net profit in Q4 FY25 came at Rs 318.15 crore, up from Rs 128 crore in the same period last fiscal.
The company’s reported EBITDA margins expanded 100 basis points on year to 16%, still lower than market expectations of a 150 basis points expansion.
In FY25, the apparel retailer expanded its footprint with the addition of 40 new Westside stores and 244 Zudio outlets, while consolidating 24 stores each from both formats. As of March 31, its portfolio stood at 248 Westside stores, 765 Zudio outlets, and 30 stores under other lifestyle concept.
Brokerage firm Motilal Oswal Financial Services flagged the continued moderation in Trent’s growth rate, though still robust given the weak discretionary demands. “Back-ended strong store additions in Zudio should aid growth in FY26. However, recovery in same store sales growth (SSSG) across fashion and Star formats would be a key near-term monitorable,” MOFSL wrote in a note.
Global investment firm Morgan Stanley also took a cautiously positive call on Trent, highlighting that Q4 had some hits and some misses. The higher-than-expected compression in gross margins indicates some inventory write-offs, noted the brokerage, regardless of which, the EBITDA margin posted a beat.
Regardless, Nuvama Institutional Equities noted the slowing like-for-like growth for Trent, which according to the firm, could be due to a combination of various factors. These include weakening demand, cannibalisation from new stores in same micro-areas, potential over-competition and base effects. "Moreover, falling LFL growth in the Star portfolio presents a concern that needs resolution for the format to achieve meaningful scale,” Nuvama believes.
Another brokerage, Jefferies also highlighted that the moderation in Trent's like-for-like growth to mid-single digits could disappoint investors.
