Retail major Trent will increase the number of launches of its supermarket and hypermarket chain Star Bazaar in FY25, as it positions the business, which is operated as part of its 50:50 joint venture with UK-based Tesco, as its third leg of growth after Zudio and Westside.
Shedding light on its future retail strategy during its Annual General Meeting (AGM) on Wednesday, Trent announced plans to add 20-25 Star Bazaar stores in FY25, according to analysts who attended the AGM. This is in addition to the 30 Westside stores and 200 Zudio stores it aims to add in the current financial year (FY25) to maintain the momentum of store additions within these segments.
Trent also stated it would follow a clustered approach with Star Bazaar stores, targeting states such as Maharashtra, Karnataka, and Telangana to create local scale, cost efficiency, and maintain a tight footprint of stores with sharp pricing and a focus on fresh and own brands (private labels).
At the end of FY24, Star Bazaar had a total of 66 stores in 10 cities; Zudio had 545 stores in 164 cities, and Westside had 232 stores in 91 cities.
The 50:50 JV, called Trent Hypermarket, saw a 21% year-on-year increase in revenue to Rs 2,210.53 crore in FY24. While the JV narrowed its net loss to Rs 0.67 crore in FY24 versus a loss of Rs 102.86 crore reported in FY23, Trent’s FY24 annual report shows. Trent has funded the losses in the Star Bazaar business mainly through the liquidation of certain financial assets and the issue of equity, sector analysts said.
Trent also operates Star Bazaar stores along with Zudio outlets through another company called Fiora Hypermarket. Fiora Hypermarket reported a 2.71% year-on-year increase in revenue to Rs 192.33 crore in FY24. Net profit came in at Rs 12.47 crore in FY24, a growth of 4% versus the previous year.
In a note on Trent on Thursday, brokerage Motilal Oswal said that Star Bazaar offered 20-30% savings to consumers with a focus on private labels. The grocery market in India provided strong tailwinds for growth, supporting Trent’s overall focus on Star Bazaar.
“In FY24, despite an improvement in gross margins of 150 basis points versus last year, Star Bazaar posted earnings before interest, tax, depreciation, and amortisation (Ebitda) of Rs 25.5 crore. This is lower (by 85%) than the Rs 170 crore Ebitda reported in FY23.
Ebitda margins in FY24 came in at 1%, which could be due to the re-classification of lease liability and the cost of modification of stores,” the brokerage said.
While Star Bazaar, Motilal Oswal noted, would need funds for its expansion for a year, it would begin to fund its growth as the business expanded and its footprint of stores increased.