Trent shares have seen a sharp slide in trade on November 10. Is the selling done, or can the counter see even more selling? Jefferies has lowered its price target for the Tata Group fashion retailer to Rs 3,550 from Rs 4,000 per share. This is 17.1% lower compared to the closing rate on November 10.
The international brokerage house highlighted that growth in the September quarter has slowed and margins came under pressure. The brokerage kept a Hold rating on the stock, pointing to weaker discretionary demand and rising competition even as the company keeps expanding its store network. The stock has fallen nearly 15% in six months.
Jefferies on Trent: Sales momentum cooling
Jefferies said a combination of a high base, weaker footfalls, and rising competition weighed on growth, especially in the value fashion segment.
Zudio, which had been driving Trent’s expansion, saw moderation in store productivity. Revenue per square foot declined 17% YoY, and operational EBITDA per square foot also dropped by a similar proportion, indicating a slowdown in same-store sales.
“Growth moderation continued as the company faced a tougher environment and rising competition,” Jefferies said in its note.
Jefferies on Trent: Margins under strain despite cost control
Gross margin fell 55 basis points from a year earlier and 185 basis points sequentially to 42.6%, affected by higher discounting and softer demand. Cost efficiencies, however, helped cushion the blow.
“Despite weaker gross margins, productivity gains and expense control limited the overall impact,” Jefferies said.
Jefferies on Trent: Subsidiary weakness weighs on performance
Trent’s other businesses, including Booker Cash & Carry and Star Bazaar, dragged consolidated results. Revenue from subsidiaries dropped 23% YoY, while operating profit fell from Rs 8.7 crore a year ago to nearly breakeven.
Star Bazaar’s sales slipped 2%, but private-label products maintained a 70% share of total revenue. Store count remained unchanged at 77, suggesting growth in the grocery segment has paused for now.
Jefferies on Trent Expansion remains steady
Despite demand challenges, Trent continued to expand its retail network. Zudio added 40 stores during the quarter, taking the total to 806, while Westside opened 13 stores, reaching 261. Overall retail space rose by over 1.1 million square feet.
Non-apparel products such as beauty, footwear, and personal care now make up more than 21% of standalone sales. Online channels including Westside.com and Tata Neu grew 56% YoY, contributing 6% to Westside’s revenue.
Jefferies says weak consumer sentiment persists
Jefferies said unseasonal rains, higher inflation, and muted discretionary spending hurt demand during the quarter. The shift in GST rates also disrupted buying patterns, causing some consumers to defer purchases.
“Consumers remain cautious on lifestyle spends and recovery could take a few more quarters,” Jefferies said.
Jefferies on Trent: Inditex JV share buyback and stake change
Trent’s joint venture with Inditex, which operates Zara stores in India, announced a Rs 150 crore share buyback. After the buyback, Trent’s stake in the JV will fall from 35% to 16%, Jefferies said.
Jefferies trims estimates and lowers valuation
Jefferies now values Trent at Rs 3,550 per share, implying limited upside from the current market price of around Rs 3,400. The brokerage values the stock at 40 times December 2027 estimated EBITDA, factoring in subsidiaries and cash reserves
Jefferies’ base case assumes a 27% annual growth rate in standalone sales led by Zudio, on a compounded basis. In its bull case, 40% CAGR could push the stock to Rs 7,500, while in the bear case, slower growth could drag it to Rs 4,000.
Jefferies outlines factors that could shift the outlook
Jefferies said slower demand, rising competition, and continued grocery losses remain key risks. On the upside, stronger festive-season sales, faster store openings, and improved same-store growth could lift sentiment.
Trent, the brokerage said, continues to be one of India’s most resilient retail franchises. But at current valuations, “a lot of optimism is already in the price.”