On Monday, April 7, 2025, shares of Tata Group’s Trent Ltd. experienced a significant drop, plummeting nearly 19% to reach an intraday low of ₹4,491.75 per share, following the company's Q4 FY25 business update. The stock's decline marks a troubling trend, as it has now fallen over 45% from its 52-week high of ₹8,345, which it reached on October 14, 2024.
By mid-morning, the stock had stabilized slightly, trading at ₹4,578.95, down approximately 18% from Friday's close of ₹5,562.85 on the National Stock Exchange (NSE). This downturn coincided with a broader market decline, as the Nifty 50 index also dropped nearly 4%, reflecting a challenging environment for investors.
Despite a reported 28% year-on-year increase in Q4 sales, which was a slowdown from the 37% growth seen in the previous quarter, analysts expressed disappointment as the company’s gross standalone revenue stood at ₹4,334 crore, falling short of expectations. This revenue growth, while positive, was not enough to alleviate concerns regarding the company's performance. Analysts noted that the revenue growth in Q4 was significantly lower than the 36% growth logged in Q3 FY25.
Goldman Sachs responded to the disappointing figures by downgrading Trent's target price from ₹7,500 to ₹6,760, citing weaker sales growth and sharper-than-usual seasonal declines. Morgan Stanley echoed these sentiments, highlighting continued deceleration in like-for-like sales growth.
In contrast to the downturn, analysts remain cautiously optimistic about Trent's long-term strategy, particularly its aggressive expansion of Zudio, its value fashion brand. Trent opened 132 new Zudio outlets in Q4 alone, compared to just 13 Westside stores. As of FY25, Zudio has surpassed Westside in both store count and retail space, driven by lower setup costs and strong consumer demand.
For the fiscal year 2025, Trent reported a total standalone revenue of ₹17,624 crore, marking a 39% increase from ₹12,669 crore in FY24. However, this growth still fell short of some analyst projections, raising questions about the sustainability of such growth in the future. Analysts noted that the annualized revenue per store in Q4 FY25 was flat year-on-year at ₹16.8 crore, compared to an 8% increase in Q3 FY25.
As part of its ongoing expansion, Trent's store portfolio now includes 248 Westside outlets and 765 Zudio stores, with two located in the UAE, alongside 30 stores across other lifestyle concepts. This aggressive expansion strategy has been a focal point for analysts who believe it could drive future growth.
In light of the recent downturn, a consensus among analysts tracking Trent shows that out of 24, 17 still maintain a 'buy' rating, while three suggest holding and four recommend selling. The average 12-month price target suggests a potential upside of about 34%, indicating that many analysts still see value in the company's long-term strategy despite current challenges.
Monday's sharp decline in Trent's shares has led to a significant decrease in market capitalization, with the company shedding over ₹30,000 crore. This decline has not only affected Trent but has also contributed to a broader loss of more than ₹1 lakh crore in market capitalization across six Tata Group constituents, including TCS, Tata Steel, Tata Motors, Titan, and Tata Consumer Products, all part of the Nifty 50 index.
Trent's operational strategies, including its ability to balance fashion risk with profitability through frequent style drops and its expansion via owned and franchisee stores, have been highlighted as key strengths. According to analysts, these factors have helped Trent achieve a compound annual growth rate (CAGR) of 45% in sales over FY23-25, along with steady margin expansion.
Macquarie recently initiated coverage on Trent with an 'Outperform' rating and a target price of ₹7,000, highlighting the company's supply chain strengths and design capabilities, which have been honed through years of experience in Indian design sensibilities and fabric sourcing. They also noted that competitive concerns about Shein's entry into the market are overblown, as replicating Shein's production cost advantage in India would be challenging.
Despite the current challenges, analysts believe that Trent's robust expansion plans and strategic positioning within the fashion retail market could provide a solid foundation for recovery as market conditions improve. The company's ability to adapt to changing consumer preferences and economic conditions will be crucial in the coming quarters.
As the market continues to react to Trent's performance, investors and analysts alike will be watching closely to see how the company navigates this turbulent period and whether its long-term strategies can bear fruit amidst short-term setbacks.
