Tata Group's Trent Limited reported its financial results for the third quarter of FY2025, showcasing strong growth amid challenging market dynamics.
The company announced revenues from operations reaching ₹4,657 crore, marking a remarkable increase of 34% compared to ₹3,467 crore reported during the same quarter last year. Despite this impressive growth, the profit after tax (PAT) attributed to equity shareholders was lower than market expectations, settling at ₹496 crore down from anticipated figures around ₹520 crore.
Sequentially, the bottom line saw substantial improvement, growing 47% from ₹339 crore reported in the previous quarter (Q2 FY2025) with the topline also showing progress with a 12% increase. This growth can be attributed to strategic initiatives within its popular Zudio brand and the series of new store openings planned this year.
Noel N. Tata, Chairman of Trent Limited, expressed optimism about the company's future. He remarked, "We are on track to significantly expand our reach and improve the quality of our store portfolio," highlighting the effective store opening program and other measures contributing to the company's growth strategy. Tata emphasized compelling customer traction within the Star business, which he believes is well-positioned to provide significant value to customers and shareholders over time.
The financial impact of the quarter was underscored as Trent's shares faced downward pressure, closing 1.3% lower at ₹5,672.70 amid market reactions. The drop was partly influenced by Reliance Retail’s relaunch of the Chinese brand Shein, directly competing with Trent's offerings. This relaunch has triggered investor concerns about potential market share loss for Trent.
Analysts had forecasted strong results for the Q3 report, predicting year-on-year revenue growth between 37-41%, equaling approximately ₹4,550-4,670 crore. With nearly 850 large-box fashion stores operating across 201 cities, the company enhanced its operational footprint significantly, opening 14 new Westside stores and 62 Zudio stores during the quarter. The company also consolidated two Westside and four Zudio stores, continuing to streamline its retail strategy.
While the earnings announcements drew close attention from investors and analysts, projected net profits were expected to rise up to 64% year-on-year. Despite this, actual figures remained slightly below expectations. The company’s Ebitda margin remained relatively stable compared to previous periods, raising discussions about cost management amid rapid expansion.
Market analysts noted the company's like-for-like growth was also trending down. The fashion business registered single-digit growth for the quarter—a stark difference from past performances when double-digit growth was common. This shift raises questions about consumer spending trends, particularly against the backdrop of broader economic uncertainties.
Going forward, the interplay of new store openings and competitive pressures will be pivotal for Trent. The company’s strategic focus on optimizing its store portfolio includes upgrading smaller stores and consolidations to suit more attractive locations is aimed at maintaining consumer interest and profitability.
Imports from its various promising segments, such as beauty and personal care, continue to grow, now accounting for over 20% of Trent's revenue. The fashion segments present vast market opportunities, especially through direct-to-consumer models.
Despite facing market challenges, brokerage firms maintain bullish outlooks for Trent. Goldman Sachs reasserted its “buy” rating with expectations of stock price recovery, projecting potential growth underpinned by favorable demographics and consumer trends favoring Trent's fashion offerings. The brokerage sees Trent's Zudio brand as having low competitive risk and positions it for substantial market share gains over time.
Investors are advised to view the recent stock performance fluctuations as potential buying opportunities, with strong fundamentals supporting Trent's long-term growth. The company appears well-positioned to leverage its market presence through innovative strategies, keeping pace with consumer dynamics. With plans to continue adding new stores and enhancing customer experience, Trent remains focused on its ambitious growth agenda.
The recent quarterly results reflect the dual challenge of maintaining revenue growth and adapting to increased competition, setting the stage for strategic pivots as merchants navigate the complex retail environment.