Sustained growth acceleration holds key for Trent stock's recovery

Trent will tender around a 15 per cent stake in Inditex Trent Retail (Zara India) for ₹150 crore at ₹15,422 per share in a buyback

Trent reported decent margins in the second quarter (July-September) of 2025-26 (Q2FY26) but growth moderated. Same store growth was low single-digits. Trent’s revenue growth decelerated in Q2FY26 at 17 per cent year-on-year (Y-o-Y) while area additions were offset by decline in revenue per square foot (sq ft).

 

Consolidated revenue grew 16 per cent Y-o-Y to ₹4,800 crore. Reported Ebitda (earnings before interest, taxes, depreciation, and amortisation) grew 27 per cent Y-o-Y to ₹820 crore. Ebitda margin rose 150 basis points (bps) Y-o-Y to 17 per cent. Gross profit grew 15 per cent Y-o-Y to ₹2,000 crore as gross margin contracted 90 bps Y-o-Y to 43.3 per cent. Reported Ebitda grew 27 per cent Y-o-Y in the first half of the financial year (H1FY26) as lower gross margin was offset by superior cost control.

 

The pre-Ind AS Ebitda for H1FY26 stood at ₹1,190 crore (up 27 per cent Y-o-Y), with margins expanding 90 bps Y-o-Y to 12.3 per cent. The Adjusted profit after tax (PAT) stood at ₹370 crore (up 11 per cent Y-o-Y), with higher Ebitda and lower tax rate, partly offset by higher D&A (depreciation and amortisation) and finance costs.

 

Trent will tender around 15 per cent stake in Inditex Trent Retail (Zara India) for ₹150 crore at ₹15,422 per share in buyback. This lowers the stake to 20 per cent, and implied valuation for Zara India is ₹780 crore. 

 

Trent saw 33 per cent Y-o-Y net store additions but revenue per store dropped 9 per cent Y-o-Y. There was low-single-digit like-for-like (LFL) growth for fashion. The Adjusted PAT for H1FY26 grew 7 per cent Y-o-Y to ₹450 crore as higher Ebitda and lower tax rate were partly offset by higher depreciation (up 65 per cent Y-o-Y), higher finance cost (up 28 per cent Y-o-Y), and lower other income (down 14 per cent Y-o-Y).

 

Star continued to underperform as revenue declined 2 per cent Y-o-Y (7 per cent Y-o-Y growth in Q1), and Star stores saw upgrades with count stable at 77. Revenue per sq ft declined 14 per cent Y-o-Y to ₹26,900 (versus 1.5 per cent YoY uptick on a larger base for DMart).

 

Free cash flow (FCF) improved and working capital (WC) days were steady at 37 days (flat Y-o-Y). The operating cash flow or OCF (after interest and leases) surged 1.5x Y-o-Y to ₹1,000 crore, driven by increase in pre-Ind AS Ebitda and favourable WC trends. The net capex rose to ₹840 crore (versus ₹380 crore Y-o-Y and ₹820 crore in FY25), which resulted in FCF of ₹230 crore (versus ₹50 crore Y-o-Y).

 

Star saw muted revenue performance with a decline of 2 per cent Y-o-Y (versus 7 per cent gain Y-o-Y in Q1) as multiple stores underwent upgrades. Annualised revenue per store declined 7 per cent Y-o-Y to ₹45.7 crore. Own-brand offerings contributed 73 per cent to Star’s revenue (stable Y-o-Y).

 

Store expansion picked up in Q2 and analysts expect the pace of additions to be sustained or increased in the second half of the financial year (H2FY26). Store count across fashion formats rose to 1,101 (up 33 per cent Y-o-Y). Westside added 13 net stores (19 openings, 6 closures), taking the total store count to 261 (up 15 per cent Y-o-Y). Area was up 28 per cent Y-o-Y. Westside is present in 88 cities (two new).

 

Zudio added 40 net store openings (44 openings, 4 closures) in Q2FY26 (41 in H1FY26 and 32 in H1FY25) to reach 806 stores (up 40 per cent Y-o-Y), with retail area up 56 per cent Y-o-Y. Zudio entered nine new cities, expanding its presence to 244 cities. Trent launched a new format, Burnt Toast, which increased the other fashion format’s store count by 5 sequentially to 34 in Q2.

 

Management says consumer sentiment in Q2 was muted. Demand may pick up over the medium term, with push from goods and services tax (GST) reforms. Emerging categories like beauty & personal care, innerwear, and footwear contributed 21 per cent to standalone revenues. Online revenue grew 56 per cent Y-o-Y, contributing over 6 per cent to Westside sales. Investments in technology and automation, such as RFID (Radio Frequency Identification) implementation, have led to optimisation and cost reductions.

 

Trent has double-digit growth, and a long runway in Star, with current presence in just 10 cities, and potential for scaleup of beauty, innerwear, footwear, and lab-grown diamonds. But it must accelerate revenue growth. That is key. Analysts have downgraded the stock and it saw heavy selling. On Monday, it hit a 52-week low of ₹4,264.05 before closing 7.4 per cent lower at ₹4,282.35 on the BSE.