Expansion, new categories to keep Trent on the growth trajectory

Aggressive store additions, category diversification and an expected recovery in like-for-like growth are expected to support Trent's long-term growth plans

A robust expansion plan, new formats, category diversification and a projected recovery in like-for-like (LFL) growth are the key positives for retail major Trent. The company stuck to its revenue and profit targets while laying out the expansion roadmap for each of its major brands at its annual general meeting held on Tuesday.

 

The progress on its targets and multi-format growth trajectory rubbed off on the stock, which gained 3.3 per cent in trade to Rs 3,246 on Wednesday. At the current price, the stock is trading at 87 times its FY27 earnings estimates and 74 times its FY28 earnings estimates. Its ability to sustain the growth trajectory and improve LFL performance will determine the stock's movement going ahead.

 

The company has stuck to its 2023 roadmap of delivering 10x growth in revenue and is on track, with revenue up 2.5 times and profit having jumped threefold since then. It has an aggressive expansion plan, which includes adding 50 stores annually for premium fashion format Westside. The company added 52 stores in FY26, while additions between FY23 and FY25 were 14-18 stores a year for this format. After adding 52 stores in FY26, the total number of Westside stores increased to 300 across 97 cities.

 

Annual additions for value fashion retail chain Zudio are pegged at 200-250 stores, as was the case last year, while those for hypermarket chain Star are estimated at 25-40 stores. The company expects that over time there is potential to operate a total of 700 Westside stores, compared with 300 in FY26, and 5,000 Zudio stores, compared with 963 in FY26.

 

As the revenue growth target cannot be achieved on the basis of Westside and Zudio alone, the company is eyeing diversification and new formats to expand its reach across customer segments. In addition to the core brands, it is looking at new formats such as Samoh (occasion and ethnic wear) and Burnt Toast (a fast-fashion brand), category expansion and selective growth in international markets.

 

In addition to store expansion, the Street will also track LFL performance across its network. The company is targeting low double-digit LFL growth going ahead after recording single-digit LFL growth in FY26. The weakness in this metric last year was on account of new products not performing well, higher store density leading to cannibalisation and stores performing strongly in their initial years. The company's LFL growth recovered in Q4FY26 after multiple quarters of deceleration. Channel checks by Motilal Oswal Research suggest that sales declines in cannibalised stores have eased, and LFL recovery is under way.

 

However, Trent's store productivity could still remain under pressure in FY27 as stores added in tier-II and smaller markets typically have lower initial productivity and take longer to reach maturity levels than those in metro and tier-I markets, according to analysts led by Aditya Bansal.

 

Despite relatively weaker growth, Trent maintained strong cost controls to sustain healthy profitability in FY26. Going ahead, the brokerage believes margin expansion will largely depend on recovery in LFL growth. It has a 'buy' rating with an unchanged target price of Rs 3,500.

 

HSBC Research points out that the potential number of stores for both formats, especially Zudio at 5,000 stores, is much higher than its estimate of 1,500, though it has maintained its target multiple at 60 times price-to-earnings. A higher multiple could be warranted if LFL growth were to pick up, say analysts led by Nihal Mahesh Jham. The brokerage has a 'buy' rating with a revised target price of Rs 3,460.