Trent trades lower for fourth day in row; down 21% from 52-week high

During CY24, Trent had outperformed the market and zoomed 133%, as compared to the 9% rise in the BSE Sensex and in CY23, the stock had rallied 126%, compared to the 20% gain in the benchmark index

Trent shares are down 4 per cent at Rs 6,591 on the BSE in Wednesday’s intra-day deals, underperforming the market in the last few trading days. Shares of The Tata Group company that is engaged in the speciality retail business is trading lower for the fourth straight trading session; it has shed 10 per cent on profit booking. The stock has corrected 21 per cent from its 52-week high level of Rs 8,345.85, touched on October 14, 2024.

 

During the calendar year 2024 (CY24), Trent had outperformed the market and zoomed 133 per cent, as compared to the 9 per cent rise in the BSE Sensex. In CY23, the stock had rallied 126 per cent, as against the 20 per cent gain in the benchmark index. From its March 2020 lows, Trent’s market price rose nearly 23-fold from the level of Rs 367.55, on the BSE.

 

Trent is a part of the Tata Group and operates a portfolio of retail concept stores. 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 Star, which operates in the competitive food, grocery and daily needs segment.

 

The company's management said its retail businesses faced headwinds in the second quarter of FY24, owing to muted demand sentiment and seasonality. However, despite this, both Westside and Zudio witnessed traction during the quarter. WestStyleClub – Westside’s loyalty program also registered strong growth during the period.

 

Trent’s H1FY2025 (April to September) numbers were good, with revenues and earnings before interest, tax, depreciation and amortisation (Ebitda) growing by 50 per cent year-on-year (YoY), while lower interest expense led to a robust 75 per cent YoY profit after tax (PAT) growth. The company’s strong execution capabilities aided it to achieve a robust 3.8x revenue growth and 6.9x PAT growth in FY2024 over FY2020. 

 

Trent is seeing a strong pick-up in new initiatives/ categories through higher contribution from online sales and emerging categories. Accelerated store expansion, higher contribution from the online channel, and a pick-up in foods business will augur well in the near term, Mirae Asset Sharekhan had said in the company's Q2 results update.

 

However, the brokerage firm has reduced the company's earnings estimates for FY2025 and FY2026 by approximately 5 per cent each to factor in a lower-than-expected revenue growth. Further, a slowdown in consumer demand will act as a key risk to the brokerage's earnings estimates for the company in the near-term, it added.

 

Meanwhile, analysts at JM Financial Institutional Securities, expect the consumer discretionary segment to outperform the staples segment, which is expected to grow in the mid-single digit on a year-on-year basis in the December quarter (Q3FY25). Growth in the discretionary segment will be largely led by the jewellery segment due to a healthy festive and wedding season, coupled with 3-4 per cent correction in gold prices from highs. That apart, a robust performance by its peer, Avenue Supermarts led by a sharp recovery in revenue per sq. ft despite pressure from quick commerce, also bodes well for the company.

 

A shift in consumer preference towards the more value segment is expected to impact demand for mid-premium fashion players. Value fashion players are expected to grow in high double digits led by a shift from unorganised to organised segment, value fashion players upping their product proposition and downtrading by consumers in a challenging demand environment, the brokerage firm said in the consumer retail sector’s third quarter preview.