Trent Q1: Margin gains shine, but here's why analysts are turning cautious

Trent Q1 results, share price: Tata Group's retail arm, Trent Ltd, reported a strong set of numbers for June quarter of financial year 2026 (Q1FY26), driven by healthy revenue growth and margin expansion. However, brokerages remain cautious due to slowing like-for-like (LFL) growth, rich valuations, and concerns about future growth trajectory.  Trent shares saw mixed movement on the bourses, falling as much as 2.69 per cent to an intraday low of ₹5,215 before rebounding into positive territory. By around 9:40 AM, the stock was up 0.8 per cent at ₹5,402, even as the BSE Sensex traded 0.17 per cent lower at 80,410.68 levels.

Strong results, expanding margins

 

In the June quarter, Trent’s net profit rose 8.5 per cent year-on-year (Y-o-Y) to ₹424.7 crore from ₹391.2 crore. Revenue grew 19 per cent Y-o-Y to ₹4,883 crore, while Ebitda surged 38 per cent Y-o-Y to ₹848 crore. Margins improved to 17.3 per cent, up from 15 per cent a year ago. 

 

The company attributed this margin improvement to gains from technology and automation, improved cost efficiency, and stable gross margin profiles across key brands, including Westside and Zudio. Operating Ebit margin for the quarter came in at 11.4 per cent, compared to 10.6 per cent last year.

 

Business update: Focus on expansion, emerging categories

 

As of June 30, Trent operates over 1,000 large-format fashion stores across 242 cities, including 248 Westside, 766 Zudio (including two in the UAE), and 29 other lifestyle concept stores. The company noted a healthy revenue trajectory despite early monsoon and geopolitical disruptions. Like-for-like growth for the fashion portfolio, however, was in low single digits.

 

Trent continues to strengthen its footprint across Tier 2 and 3 cities, which are still developing in terms of fashion adoption and consumption density. The company said these newer markets represent significant long-term opportunities, though their performance may not yet match mature urban centres. Emerging categories—beauty, personal care, innerwear, and footwear – now contribute over 21 per cent of Trent’s revenue.

 

Online revenue for Westside rose 35 per cent Y-o-Y, contributing over 6 per cent of Westside’s overall sales, supported by its presence on the Tata Neu platform.

 

Chairman Noel N Tata said, “The business delivered steady performance during the quarter. We remain focused on evolving our differentiated consumer proposition that appeals to a wider audience across diverse markets. Notwithstanding continuing competitive intensity and interim trends, we believe an unwavering focus on being relevant to our customers and building resilience with our business model choices will, over time, enable us to deliver significant value. We believe building density of our presence in key markets allows us proximity and the ability to service our customers readily. Both Westside and Zudio now have the scale & reach and enjoy significant consumer awareness & love. We remain on track to build a sizable and scalable pure play direct-to-customer business in the context of the market size and opportunity…”  ALSO READ | Exide's Q1 surprise triggers mixed analyst calls; what should investors do?

What brokerages say: Margin wins, but slowing growth, valuations a concern

 

Despite the strong margin performance, most brokerages have taken a cautious stance on Trent’s near-term prospects.

 

Motilal Oswal noted that while Ebitda growth of ~37 per cent Y-o-Y (a 17 per cent beat) was driven by cost control and scale benefits, revenue growth is showing signs of deceleration. Westside and Zudio performed well, but the Star business lagged with just 7 per cent revenue growth and a 14 per cent decline in revenue per sq. ft. Thus, analysts at Motilal Oswal lowered PAT estimates by 3-6 per cent due to higher depreciation, while maintaining a ‘Buy’ with a reduced target price of ₹6,400.

 

According to reports, Citi also maintained a ‘Buy’ but cut the target price to ₹7,150 from ₹7,600, citing lower operating expenses as a key driver for the earnings beat. However, it highlighted muted store expansion and the moderation in LFL growth.

 

Nuvama was more cautious, retaining a ‘Hold’ rating with a revised target of ₹5,850 (from ₹5,884). It pointed out that the LFL growth was low, and margin improvements were driven by a 331 bps drop in retailing costs, partly offset by a decline in gross margins. Nuvama revised down revenue/Ebitda estimates for FY26/27, citing structural pressure on LFL performance.

 

Avendus reportedly downgraded Trent to ‘Reduce’ and slashed the target to ₹5,000 from ₹5,650, calling FY26 a potential ‘consolidation phase.’ It flagged valuation concerns with Trent trading at 65x forward PE and argued that muted macros could cap the company’s market cap near ₹2 lakh crore. While it acknowledged steady Ebitda margins (17-18 per cent), it found the risk-reward unattractive.

 

Trent outlook

 

Trent’s Q1FY26 performance highlighted its execution strength, particularly in managing costs and scaling operations. But with LFL growth slowing and expansion pace moderated, investor focus may shift to how the company sustains top-line momentum. 

 

Brokerages remain divided, bullish on long-term prospects but cautious in the near-term given valuation headwinds and macro pressures.