Trent's Q2 profit rises over 11% but misses estimates

Trent Ltd on Friday reported muted growth for the September quarter, with both revenue and profit missing estimates as demand softened after a strong start to the fiscal year.

The Tata group company's revenue from operations increased by 15.9% to ₹4,817.68 crore, falling short of Bloomberg's analyst estimate of ₹4,998.30 crore. Net profit rose by 11.34% to ₹373.42 crore, falling short of the estimated ₹446.3 crore.

“Trent’s performance this quarter was steady despite a high base,” said Sandeep Abhange, research analyst, consumer and midcaps at LKP Securities. “Revenue growth moderated mainly due to seasonality, festive discounting, and costs linked to aggressive store additions. Margins softened slightly as expansion and promotional activity weighed on profitability, while lower associate contribution from the Star business also impacted the bottom line.”

The Mumbai-based retailer added 13 Westside and 40 Zudio stores in the quarter, underscoring its continued store-led growth strategy despite uneven discretionary consumption. As of September, Trent’s retail network stood at 261 Westside and 806 Zudio stores (including 3 in the United Arab Emirates), with over 1,100 outlets across its formats.

Widening formats

Trent, part of the Tata enterprise, operates three main retail formats—Westside, Zudio, and Star—and has recently launched a fourth youth-focused fashion brand called Burnt Toast, which targets Gen-Z consumers with bold apparel and accessories. The company said the initial response to Burnt Toast has been positive and encouraging.

Westside is Trent’s flagship chain offering contemporary fashion across apparel, footwear, beauty, and home categories. Zudio caters to the value fashion segment, while Star operates in the food and grocery retail space.

Trent’s consolidated financials do not include the revenue from its Star (Trent Hypermarket) business, which is accounted for separately under the equity method. During the quarter, Star’s revenue stood at ₹879 crore, down 2.16% from a year earlier, amid heightened competition in the grocery segment. The company said own-brand products contributed 73% of Star’s revenues, led by private labels such as Fabsta, Klia, Skye, Star, Smartle, and Zudio.

Speaking on the performance this quarter, Noel N. Tata, Chairman of the company, said that the company remained focused on growth and enhancing its customer experience. “We remain focused on portfolio growth, elevating our products and enhancing store experience for our customers,” Tata said. “Reduction in GST rates is a welcome step and over time is likely to augur well for our product categories. Notwithstanding continuing competitive intensity and interim trends, we believe an unwavering focus on being relevant to our customers and building resilience with our business model choices will continue to hold us in good stead.”

Exciting proposition

“The opportunity in the food space for the Star proposition is exciting; at the same time, it is intensely competitive,” Tata said. “We remain convinced that this business is well poised to deliver growing consumer value in the years ahead.”

“Trent continues to outperform peers. However, due to the high base, the growth trend looks to be moderating. It is well-positioned to navigate the competitive business environment in the medium to long term,” said a 7 October analyst note by Antique Stock Broking Ltd.

The brokerage further highlighted that Westside will remain a key focus area for the company. “A majority of the Westside stores were turned operational during September, which would contribute to revenue in the coming quarters. As per our understanding, Westside will be a key focus area for Trent as the company has added 13 stores in 1H versus 14-18 annual additions during the last three years,” the note said.

The quarter also saw the exit of one of its independent directors, Susanne, following the completion of her five-year term.