Trent is one of the top gainers in trade today. Motilal Oswal reiterated ‘Buy’ with a revised target price of Rs 4,350, implying a 29% upside. It has, however, trimmed earnings estimates but continues to back the stock on the strength of its brands and long runway, while cautioning that near-term earnings pressure may persist.
The brokerage says growth has slowed in recent quarters due to weak like-for-like sales, rising competition in key urban markets and the company’s push into smaller towns that take longer to mature. Even so, they believe cost controls and supply chain improvements are supporting margins.
Motilal Oswal on Trent’s growth slows as pressures build
Motilal Oswal points to a visible cooling in Trent’s revenue momentum, especially across stores outside core clusters and in discretionary categories. The brokerage notes that expansion into new geographies has come with a lag in productivity, which has weighed on overall numbers.
The report states that competition has intensified in metro and tier one markets, while demand has stayed uneven. This combination has hurt like-for-like growth, even as store additions continue.
“Trent’s revenue growth has decelerated over the past few quarters owing to weak like-for-like growth and weak discretionary demand along with rising competition,” the brokerage said.
Motilal Oswal adds that recent channel checks suggest the drag from cannibalisation between stores is beginning to ease, though recovery is still gradual. The brokerage expects that margin gains from cost efficiencies could partly offset the softer topline, but a meaningful rebound hinges on demand recovery.
Motilal Oswal on Zudio consolidation phase weighs on expansion
Zudio remains central to Trent’s growth story, but the pace of expansion has moderated as the company focuses on consolidation. The brokerage notes that Zudio scaled rapidly in recent years, but the next phase is about strengthening store economics rather than chasing aggressive additions.
According to the report, store additions are now running below earlier expectations and could fall short of projections for the current financial year. Expansion has increasingly moved into tier two and smaller markets, where gestation periods are longer.
“Zudio scaled up aggressively driven by its strong value proposition, but the pace of store additions has moderated as the company focuses on consolidation,” Motilal Oswal said.
The brokerage also points out that productivity in new markets has taken longer to stabilise, which has dragged down blended store metrics. While expansion into smaller towns is important for long term growth, it is currently acting as a near term headwind.
Motilal Oswal on Westside recovery with calibrated expansion
Westside, Trent’s flagship format, has seen a more measured expansion after a pause. Motilal Oswal notes that the company has reworked its approach by focusing on larger stores and improving product mix, which has helped revive growth momentum.
The brokerage highlights that Westside is seeing steady additions again, supported by better customer engagement and sharper merchandising. The company has also been working on premiumisation across its in house brands.
“With the renewed brand proposition, Trent has again accelerated the pace of Westside store additions while improving customer experience,” the report said.
Motilal Oswal expects store additions in this format to continue at a steady pace over the next few years, with scope for upside if demand strengthens.
Motilal Oswal on rising competition and store density hurting productivity
One of the key concerns flagged in the report is the impact of higher store density in select markets. As Trent expands deeper into existing clusters, overlap between stores has led to pressure on store level sales.
The brokerage notes that this has been visible in declining store productivity over the past two years. While the pace of decline may slow, a sharp recovery is unlikely in the near term.
“The company’s focus on increasing store density has led to cannibalisation of sales and reduced store productivity,” Motilal Oswal said.
At the same time, expansion into tier two locations comes with slower ramp up, adding to the pressure. Motilal Oswal believes these factors will keep store level metrics below earlier highs for some time.
Motilal Oswal on margins supported by cost discipline
Despite the growth slowdown, Trent has managed to improve profitability through tighter cost controls and operational efficiencies. The brokerage highlights that initiatives such as better inventory management and technology-led cost savings have supported margins.
Motilal Oswal expects margin expansion to be more gradual going ahead, as many of the easy gains from cost rationalisation are already in place.
“Trent’s profitability improvement has been structural, led by process efficiencies and cost rationalisation initiatives,” the report said.
The brokerage adds that further gains will depend on recovery in store productivity and sales growth, rather than just cost measures.
Motilal Oswal on earnings downgrades and valuation comfort
Motilal Oswal has cut its earnings estimates for Trent over the next two financial years, citing slower revenue growth and near term pressure on store metrics. Consensus estimates have also moved lower over the past year.
Even after these revisions, the brokerage believes the stock still trades at a premium to peers, though recent correction has brought valuations closer to comfort levels.
“Despite earnings downgrades, we maintain our buy rating with a revised target price of Rs 4,350, premised on long term growth visibility,” Motilal Oswal said.
The report notes that the stock is currently trading at around 32 times estimated earnings before interest, taxes, depreciation and amortisation for FY28, which remains higher than other fashion retailers but is supported by its growth profile.
Conclusion
Motilal Oswal continues to back Trent despite a softer near term outlook. The brokerage sees pressure from slower demand, rising competition and expansion related challenges, especially in newer markets. At the same time, it points to strong brand positioning, disciplined cost management and steady store additions as factors that keep the long term story intact.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.