By I-Sec research
TRENT has consistently delivered exceptional performance over the past eight consecutive quarters, achieving remarkable results across key metrics such as revenue, like-for-like (LFL) growth, retail expansion, and operating profit. Notably, the LFL growth rate of 12% is the highest in the apparel sector. The robust retail expansion, with a y-o-y growth rate of 40%, instills confidence in the continued success of the Zudio franchise. Despite the entry of formidable competitors like Reliance and Shoppers Stop in the value price segment (approximately Rs 500), there’s an anticipated increase in competition. However, we remain optimistic that Zudio will continue to lead the category’s growth due to its advantages in scale, boasting 552 stores, and generating approximately Rs 47 billion in revenue for the FY2024. Zudio’s differentiation and operational efficiency further solidify its position.
TRENT’s net margin remains healthy, which is a positive indicator of its financial well-being. Given the impressive performance and growth prospects, we maintain our BUY recommendation, anticipating continued success and sustained value creation.
Strong revenue growth driven by LFL and retail expansion
Revenue grew 54% y-o-y led by 12% LFL growth. Retail expansion stood at healthy 40% y-o-y to 609 fashion stores (Westside and Zudio). Increase in revenue contribution from emerging categories (BPC, innerwear and footwear) at 19% is healthy. However, revenue contribution from online channel declined to 4% compared to 6% during FY23. In online revenue, contribution from own website (westside.com) stands at healthy 32%. Weststyle club continues to witness positive traction; now 9 million members.
Valuation and risks
We’ve raised our EPS estimates for FY24E-FY25E by 15%-17%, thanks to revised Zudio store expansion plans (200 stores compared to 119 in FY23). We anticipate impressive CAGRs for revenue (34%), Ebitda (39%), and PAT (37%) during FY23-FY25E. Key risks include: (i) slower discretionary spending growth, (ii) increased competition from peers (e.g., Reliance Trends, Max, Pantaloons), and (iii) execution challenges with Zudio. On the upside, success in Zudio and other pilot formats presents significant opportunities.