India’s vibrant marketplaces are changing. Tradition and modernity are merging in the fast-changing retail world. As a result, the retail industry in India is flourishing. Brands from around the world and locally are vying for market share. E-commerce platforms are growing in the interim. In addition, shoppers are welcoming novel shopping encounters.
Trent Limited is making an impression in this ever-changing market. Popular retail businesses including Westside and Zudio are operated by the corporation. Trent is also concentrating on lifestyle and fashion items. It is thus making significant progress in the market. In the end, Trent is a part of the retail industry’s success story. This article will examine Trent Ltd.’s expansion, its potential future growth, and its sustainability, and whether the valuations are justified.
Industry Overview
India’s retail industry is witnessing a stunning shift. The sector is rapidly emerging as a driving force in the country’s economy. Currently, retail contributes more than 10% of India’s GDP. It also employs approximately 8% of the workforce. Furthermore, India is emerging as a leading global retail destination.
Meanwhile, multinational retail behemoths are eyeing India’s large, untapped market. They are drawn to the burgeoning middle class and increased spending power. Furthermore, urban customers are developing a preference for branded products. This trend extends across other areas, including apparel and jewelry.
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Furthermore, the Boston Consulting Group anticipates a bright future. They expect the retail sector to reach $2 trillion by 2032. As a result, the sector is adapting to match changing consumer tastes. As a result, retail is blending business with leisure, catering to modern Indian tastes. However, in the midst of this, fast fashion is one segment that is exhibiting promising growth potential.
Company Overview Of Trent
Trent, established in 1998, is writing a compelling story in India’s retail sector. The company began as a single Westside store in Bangalore. It’s growing from its Tata Group roots into a major retail force.
Trent is operating multiple brands including Westside, Zudio, and Star Bazaar. It employs over 25000 people across India. The company is headquartered in Mumbai, Maharashtra. Moreover, Trent is expanding rapidly, with close to 900 stores nationwide. Furthermore, Trent is adapting to digital trends and enhancing its omnichannel strategy.
The company is focusing on sustainable practices and innovative retail concepts. Additionally, it caters to diverse consumer segments with its varied brand portfolio. Consequently, Trent is positioning itself as a key player in India’s organized retail space. It’s competing effectively with both domestic and international brands. As a result, Trent is gaining significant market share in the evolving Indian retail landscape.
Segments of Trent
Trent predominantly operates in 2 segments: Food & Grocery and Fashion
Food & Grocery – Star
The Star grocery and food chain, although smaller in comparison to Westside and Zudio, demonstrates steady progress. Its revenue has grown from ₹293 crores in Q1 FY21 to ₹815 crores in Q1 FY25, showcasing a CAGR of 29%. Despite challenges, Star operates over 72 stores with a retail area exceeding 1.1 million square feet (approximately 10.2 lakh square feet).
The brand’s presence spans 10 cities, with significant like-for-like growth of 22% in Q1 FY25, compared to 15% negative growth during the pandemic years. Star’s performance illustrates its recovery and momentum in the food and grocery sector.
Fashion – Zudio
Zudio has experienced remarkable growth, with its store count surging from 80 in Q1 FY21 to a staggering 559 in Q1 FY25, indicating an impressive compound annual growth rate (CAGR) of 63%. The retail area under Zudio’s operations exceeds 5.2 million square feet (approximately 48.3 lakh square feet).
The brand has expanded its presence to 164 cities, further amplifying its reach in the value fashion segment. The last quarter alone witnessed a significant leap, adding 171 stores compared to the previous year. Zudio’s rapid growth trajectory underscores its growing appeal to consumers and the scalability of its business model.
Fashion – Westside
The Westside retail chain has seen steady growth in its store count. It increased from 165 in Q1 FY21 to 228 stores in Q1 FY25, representing consistent expansion. With a vast retail space of over 4.6 million square feet (approx. 42.7 lakh square feet), Westside operates across 86 cities.
In the most recent quarter, six stores were added, and ten were transitioned. Westside’s continued growth reflects its steady pace of development. Compared to last year, it added seven stores, showing its resilience and adaptability. The brand’s wide reach across cities highlights its strong footprint in the fashion retail industry.
Growth Potential Of Trent
Disclaimer: The company doesn’t share any detailed future outlook. However, we have analyzed based on the information that we could gather to determine where Trent Limited has an edge over its competitors.
Zudio
Zudio has quickly emerged as a strong competitor in the fast fashion industry, with the potential to challenge global giants like Zara. By expanding to 559 stores and covering over 48 lakh square feet, Zudio shows it can replicate Zara’s fast fashion model in India.
The brand can harness the bulk manufacturing concept, ensuring swift turnover of trendy clothing, but at prices tailored to the Indian market. With affordable fashion and rapid product updates, Zudio appeals to India’s price-conscious consumers. Its ability to scale quickly and offer fresh styles could help it eventually surpass Zara in the vast and diverse Indian fashion market.
Star
Star, part of Tata’s retail portfolio, competes effectively with major grocery retailers like Reliance Fresh, DMart, and More by employing several strategic approaches. Leveraging Tata’s bulk buying power, Star can negotiate better prices from suppliers, allowing them to offer competitive pricing on groceries and fresh produce.
The focus on their own branded products is a key factor, with the share of their own brands increasing from 63% to 72% year-over-year. By developing and promoting these private labels, Star provides quality goods at lower prices compared to national brands. Strategic pricing places their branded products alongside other options, attracting cost-conscious consumers while offering variety.
Additionally, Star’s diverse product mix, which spans fresh produce, staples, FMCG, and general merchandise, caters to a wide range of customers. The emphasis on fresh produce, growing from 15% to 18% of their sales mix, shows their focus on quality and competitive pricing in fruits and vegetables.
This approach drives foot traffic and boosts sales. With a mass-market appeal, Star balances affordable own brands with premium options, catering to diverse Indian consumers. Their expanding brand share reflects an increasing foothold in India’s retail landscape, likely through new store openings and deeper market penetration.
Financial Overview Of Trent
Yearly Results
Trent has demonstrated remarkable financial performance over the past few years. The company’s revenue has grown significantly, increasing by 50.15% from ₹8,242.02 crore in March 2023 to ₹12,375.11 crore in March 2024. Additionally, the company’s net profit has seen a staggering improvement of 274.11%, rising from ₹394 crore to ₹1,477 crore over the same period.
Furthermore, the operating profit margin has improved notably, increasing from 11.17% in March 2023 to 18.09% in March 2024. This indicates that the company is not only growing in revenue but is also becoming more efficient in its operations. The operating profit has shown robust growth as well, increasing by 143.15% from ₹921 crore in March 2023 to ₹2,239 crore in March 2024.
Moreover, the earnings per share (EPS) have surged by 234.22%, rising from ₹12.51 in March 2023 to ₹41.82 in March 2024. These financial indicators highlight the company’s strong market position and effective management strategies, positioning it for sustained growth in the competitive industry.
Quarterly Results
Trent showed strong growth in the June 2024 quarter. Revenue jumped to ₹4,104 crore from ₹2,628 crore in June 2023. While, net profit shot up by more than 200% from ₹167 crore in June 2023 to ₹391 crore, although there was an exponential jump in profit in March 2024 it was because of an exceptional item.
On the bright side, operating profit shot up to ₹613 crore in June 2024 from 367 crore in the same quarter of the last year. The company has maintained its operating margin at 14-15%. Earnings per share also increased to ₹11.04 from a mere ₹4.88. This growth reflects its strong market position and effective strategies. The coming quarters will likely show if this trend continues.
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Future Plans Of Trent
Trent, led by Noel Tata, is setting its sights beyond Indian borders. The company plans to open a flagship store in Dubai soon. This move marks Trent’s first step into international markets. Their success with Zudio, which crossed ₹10,000 crore in revenue, has boosted their confidence.
The retailer aims to tap into the large Indian diaspora overseas. They might seek an international partner to help with this expansion. However, the CEO of Trent Limited P Venkatesalu is cautious about revealing specific plans. Trent’s strong domestic performance, with a 45% five-year growth rate, supports this bold move.
Despite challenges in the apparel sector, Trent continues to impress with its revenue and profit margins. This success gives them a solid foundation for their global ambitions.
Should you buy Trent despite having a high valuation?
Citi Bank sees bright prospects for Trent. They project a target price of Rs 9,250 for the stock. This goal shows a 22% upside from current prices. Citi believes Trent can reach new heights.
The bank’s optimism stems from Trent’s strong performance. The company is growing faster than its rivals. It’s adding new growth drivers to boost sales. Trent aims for high growth in revenue, profits, and cash flow over the next few years. The firm is also using its supply chain wisely. It’s bringing fresh ideas from its other brands. Trent is breathing new life into its Star business too. These factors led Citi to add Trent to its key Asian stock picks.
Trent’s addition to the Nifty 50 Index in place of Divi’s Laboratories would also lead to a greater influx of funds in the stock which could push the prices to new heights.
Key Metrics Of Trent
Conclusion
Trent Limited is showcasing impressive growth in India’s dynamic retail sector. The company is expanding its store network rapidly, particularly through its Zudio brand. Meanwhile, Westside and Star are also contributing to Trent’s market presence. Furthermore, Trent is demonstrating strong financial performance with significant revenue and profit increases.
The company is maintaining healthy operating margins while scaling operations. Additionally, Trent is adapting to changing consumer preferences and digital trends. Consequently, Trent is positioning itself as a major player in India’s organized retail space. However, questions remain: Can Trent sustain its rapid growth rate in the long term? How will Trent’s multi-brand strategy evolve to meet future market challenges? Please comment below.
Written By Dipangshu Kundu
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