Westside opened 17 net new stores while Zudio opened 48. The performance was impacted by the goods and services tax (GST) transition and early festive season. Costs came down with automation-led productivity gains as radio-frequency identification (RFID) was rolled out.
In total, Trent has 1,164 stores across fashion and lifestyle and falling SSG may to some extent be also due to cannibalisation. Store additions for Westside have outrun guidance of an annual target of 14-18 stores with 30 net new stores added in 9MFY26, for a total 278 stores. Zudio added 89 stores in 9MFY26, for a count of 854 stores (including four in UAE). Much of the expansion was in smaller towns and micro-markets. Management says it prefers the company-operated model. Store additions usually accelerate in the fourth quarter (Q4) and this is monitorable.
Standalone revenue grew 16 per cent Y-o-Y to ₹5,260 crore on a high base (37 per cent Y-o-Y growth in Q3FY25). LFL growth for fashion was marginally negative due to the early festive period. Management feels sentiment is improving. Emerging categories like BPC (beauty & personal care), innerwear, footwear, etc. are growing fast, contributing 21 per cent of revenue. Online revenue grew 38 per cent Y-o-Y to contribute 6 per cent of Westside sales.
Gross margin expanded 29 bps Y-o-Y and Ebitda margin expansion of 194 bps was much higher owing to operating leverage. Investments in automation and technology, such as pan-network RFID deployment improved the supply chain and productivity, enabling manpower optimisation. Other income grew 172 per cent Y-o-Y to ₹153 crore leading to PAT growth at 40 per cent Y-o-Y. Other income growth was probably due to proceeds from Zara India share buybacks.
Growth deceleration is apparent, given 16 per cent Y-o-Y growth versus 39 per cent Y-o-Y area addition, reflecting the festive shift, subdued sentiment, and lower productivity of new stores. Revenue per sqft declined 18 per cent Y-o-Y. Manpower cost efficiencies have now mostly been realised and cost optimisation from here on would depend on investments in technology, logistics, and warehousing.
Star continued to struggle with modest revenue growth of 1 per cent Y-o-Y as some stores were closed for upgrades. Management acknowledged slow store additions in the category and is looking to accelerate this.
Trent’s LFL growth for fashion was marginally negative in Q3FY26 while gross profit grew 17 per cent Y-o-Y to ₹2,370 crore with gross margin at 45 per cent. Standalone (pre-Ind AS) Ebitda grew 23 per cent Y-o-Y to ₹822 crore (similar 23 per cent Y-o-Y in 9M), with (pre-Ind AS) Ebitda margin of 15.6 per cent (up 90bp Y-o-Y). Reported Ebitda grew 28 per cent Y-o-Y to ₹1,070 crore with reported Ebitda margins up 194bp Y-o-Y to 20.4 per cent. Depreciation was up 48 per cent Y-o-Y and finance costs rose 17 per cent Y-o-Y. The company assumed ₹25.8 crore provision toward the new labour code. Adjusted for this, PAT grew 42 per cent Y-o-Y to ₹670 crore. Note that the other income may not be replicable.
Consolidated revenue grew 15 per cent Y-o-Y to ₹5,350 crore and Reported Ebitda grew 28 per cent Y-o-Y to ₹1,080 crore with 310bp YoY margin improvement to 20.2 per cent. Operating (pre-Ind AS) Ebitda grew 20 per cent Y-o-Y to ₹840 crore, with margin up 70bp Y-o-Y to 15.7 per cent. The adjusted PAT was ₹530 crore, up 7 per cent Y-o-Y, with higher Ebitda offset by high depreciation and finance costs.
Trent expects GST rationalisation benefits to flow through the medium term. Trent is facing some supply-chain related challenges due to geopolitical disturbances. The strategy is to grow revenue share through increased density in key markets. Competitive intensity is high.
Margins may be sustained but are unlikely to be improved much if at all. Revenue growth acceleration will be key to valuation upgrades. The stock has corrected 30 per cent in the last 12 months but it rose on the results. Analysts seem to be bullish.
According to Bloomberg, 18 of the 26 analysts polled post results are bullish, while five are neutral and remaining three are bearish. The average one-year target price is ₹4,727.77, compared to the current price of ₹4,131.60.
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