Revenue miss in Q3 to keep apparel retail major Trent under pressure

The company reported a 17 per cent year-on-year (Y-o-Y) growth in sales for the quarter, which was below Street estimates

Shares of apparel retail major Trent fell over 8.6 per cent to ₹4,047 at the close on Tuesday. Trading near its 52-week low, the stock has shed about 43 per cent over the past year. Sentiment around the Tata group company weakened after it reported lower-than-expected revenue for the third quarter (October–December/Q3) of 2025-26 (FY26). Brokerages expect the stock to remain under pressure and trade weakly in the near term.

 

The company reported 17 per cent year-on-year (Y-o-Y) sales growth for the quarter, below Street estimates. This marked the sixth consecutive quarter of revenue growth falling short of expectations. For the nine months ended December, revenue growth stood at 18 per cent.

 

According to Motilal Oswal, revenue growth was primarily driven by a 28 per cent Y-o-Y increase in store count, while revenue per store declined 11 per cent Y-o-Y (versus a 9 per cent Y-o-Y decline in the first half/H1 of FY26), pointing to continued cannibalisation at the store level.

 

During the quarter, Trent added 48 Zudio stores and 17 Westside stores on a net basis, taking the total store count to 854 and 278, respectively. The company has consistently and aggressively expanded Zudio, adding 100 stores in 2021-22, 119 in 2022-23 (FY23), 193 in 2023-24, and 220 in 2024-25 (FY25). In FY26 so far, it has added 89 stores. 

 

Westside added 17 stores on a net basis during the quarter and 30 stores in the first nine months of FY26. The annual run rate between FY23 and FY25 was 14–18 stores, indicating a clear acceleration. Trent now operates 1,164 stores across all formats. Antique Stock Broking expects some moderation in Zudio store additions, alongside an acceleration in Westside expansion.

 

As store additions typically pick up in the fourth quarter (January–March/Q4), the Street will closely track progress during this period. With same-store sales growth remaining weak, brokerages see store additions as the primary driver of top-line growth.

 

Trent’s stock had rallied in recent days — up 9 per cent since December 19 — on expectations of a pickup in revenue growth. However, weaker-than-expected numbers could weigh on the recent recovery, with earnings downgrades likely to continue in the near term, Motilal Oswal said. The brokerage maintains a ‘buy’ rating on the stock.

 

Beyond revenue, the Street will also monitor margin trends. While gross margins contracted by 88 basis points (bps) Y-o-Y to 43.3 per cent in the second quarter (July–September/Q2) of FY26, operating margins expanded by 134 bps Y-o-Y.

 

During H1FY26, the company rationalised employee and rental costs, leading to a 178-bp increase in operating margins. Employee costs declined 3.5 per cent Y-o-Y, falling 137 bps as a share of sales to 6 per cent. Rent rose only 3.7 per cent Y-o-Y, while its share of sales fell 135 bps to 9.5 per cent. Other expenses grew 18 per cent Y-o-Y, in line with revenue growth. These trends are expected to continue in the second half of FY26.

 

Antique Stock Broking has factored in 19 per cent revenue growth and a 24 per cent jump in operating profit over FY25 through 2027-28, driven by a focus on the core portfolio, disciplined scaling, accelerating momentum at Westside, and cost efficiencies. The brokerage, which has a ‘buy’ rating and a target price of ₹5,700, believes Trent will continue to outperform peers.

 

Among other brokerages, Citi Research has a ‘sell’ rating with a target price of ₹4,350, while Morgan Stanley and UBS have ‘overweight’ and ‘buy’ ratings with target prices of ₹5,456 and ₹6,200, respectively.