he Tata-owned retail company Trent likes keeping things simple. A no-frills, no-fuss strategy defines its store launches and new initiatives. And in a market known for seeking media mileage, Trent, much like its chairman, Noel Tata, keeps a low profile.
Yet, beneath the quiet veneer is a company aiming for the best. Trent has been scripting a new retail story, putting small towns such as Vapi and Godhra in Gujarat, Muzaffarpur in Bihar, Rudrapur in Uttarakhand, Dibrugarh in Assam, Khammam in Telangana, Thrissur and Pattambi in Kerala, Davanagare in Karnataka, Hanumangarh in Rajasthan and Sangli and Solapur in Maharashtra on the retail map.
The precision with which Trent has been executing its business strategy, notably, over the last two years, after it emerged from a pandemic-induced slowdown in FY21, has taken the stock market by storm. Year-to-date, the Trent stock has appreciated nearly 53% on the BSE and remains an investor favourite, even as consolidated topline has nearly doubled in two years to Rs 8,242 crore at the end of the fiscal ended March 2023 and net profit has grown over four times during the period to Rs 445 crore, according to the company’s financial statements.
Analysts at Motilal Oswal expect Trent to cross Rs 10,000-crore in consolidated topline in the next one year, growing at about 31-32% per annum over the next few years. The company may touch Rs 15,000 crore in terms of topline in the next two years and near the Rs 19,000-crore-mark in terms of turnover in three years, the brokerage said in a recent report on the company.
This pace of growth will come as the retailer simply tears through small town India, launching stores at a frenetic pace under Zudio, its value retail format, luring consumers with affordable, yet quality apparels and accessories, all priced at under Rs 1,000 a unit.
In the process, the company has shed its slow-mover tag that defined its retail journey for much of its 25-year existence under flagship brand Westside, an apparel chain that has products at a higher price point skewed largely towards urban consumers. It has chosen instead to blaze a trail with Zudio, launched only seven years ago and skewed largely towards emerging retail markets.
Consider this: Between FY21 to FY23, Zudio has added more oulets (219) than all of Westside’s store network (214) put together in the period. At the end of the June 2023 quarter, Westside had a total of 221 stores to Zudio’s 388 stores. And the company has no plans to stop there. It will add another 200 stores over FY24 under Zudio, even as Westside will add some 30 stores during the period, according to plans unveiled during the company’s annual general meeting held in June.
Zudio already constitutes 40% of Trent’s gross revenue, with Westside making up the rest, analysts at brokerage ICICI Securities said. This number will gradually tilt towards the 50:50 mark in the next two years, the brokerage says, and will cross the 50% mark in the next three years as it leverages the consumption boom in Small Town India.
Trent declined to comment on its business plans when contacted. But the company has lined up nearly four times its FY23 capex of Rs 215 crore for FY24 in terms of outlay for store expansions at Rs 800 crore, according to analysts tracking the company. And capex could even increase, analysts at brokerage Sharekhan say, in the coming years as Trent decides to ride the retail boom even more aggressively, picking out less crowded markets whose consumers aspire for a better standard of living. Rivals such as Reliance Retail and Shoppers Stop are already taking note, launching formats such as ‘Yousta’ and ‘Intune’ to take on Zudio over the last few months.
Catch them fast
According to consultancy Redseer, tier III and IV markets in India are witnessing a consumption boom never seen before, fueled by aspirational demand, ease of digital payments and social media, even as tier I and tier II markets remain key consumption centres for retailers, though overcrowded.
“Zudio has grabbed an opportunity that was waiting to be explored,” says Arvind Singhal, chairman of retail consultancy Technopak. “Consumers across socio-economic classes want to trade up. That is a universal truth about consumption. What Zudio is doing is hitting the right notes with a consuming class that is sitting at the mass-end of the market,” he says.
While retailers such as Max Fashion from the Landmark group have tapped the retail opportunity in small towns ahead of Trent’s Zudio, the latter is fast catching up, says Singhal. For instance, Max Fashion will set up 100 stores in the next one year, taking its outlet count to close to 600, company officials said. Zudio is also expected to near that number in the next one year, given its 200-store addition plan for FY24, experts said.
What sets Zudio stores apart from the rest, say experts, is its disciplined approach to the business. The retailer identifies markets where there is an aspirational consuming class, aware of fashion and lifestyle trends. These markets typically do not have a strong modern retail culture to flaunt with Zudio stores quickly becoming magnets for consumers, given its aspirational shopping experience, neat line of products and affordable price lines. The store size is also around 5,000 to 8,000 sq ft depending on the retail location, with rentals being cheap within these markets.
“Trent has a huge runway for growth driven by strong productivity, retail footprint additions and Zudio’s value proposition,” analysts at brokerage ICICI Securities, say.
With consumers lapping up its collections, notably, at Zudio, the moment they are out. And Trent maintaining a razor-sharp focus on top-selling items and stock-keeping units to ensure high inventory turnover and sales, the cash registers will keep ringing.