Trent misses Q1 estimates as store-led growth masks weak demand

Trent Ltd delivered another quarter of double-digit revenue and profit growth, powered by an aggressive store expansion strategy, but slowing demand at existing outlets kept the Tata Group retailer from meeting Street expectations.

Consolidated revenue from operations rose 17.8% year-on-year to ₹5,754.7 crore in the quarter ended 30 June (Q1FY27), missing the Bloomberg consensus estimate of ₹5,870 crore. Consolidated net profit increased 22% to ₹518.1 crore, below analysts' expectations of ₹530 crore.

“The business delivered encouraging performance during the quarter notwithstanding continuing macroeconomic volatility and geopolitical events,” chairman Noel N. Tata said.

“Our brands continue to represent only a small share of the overall addressable market, providing significant headroom for growth across geographies and customer segments. Our performance is anchored in our ability to offer relevant products, remain attuned to evolving customer preferences and respond with agility,” he said.

The company said it expects the pace of annual store additions to remain broadly consistent with the outlook shared at its annual shareholders' meeting, although quarterly openings may vary depending on property development, fit-outs and regulatory approvals.

The earnings also come ahead of Noel Tata's retirement later this year after reaching the Tata Group's retirement age. The company has yet to announce his successor. At Trent's annual general meeting in June, Tata reiterated his ambition to make the retailer 10 times larger in revenue with commensurate profitability, saying its revenue and profitability run rate has already grown more than 2.5 times since he first outlined the goal in 2023.

Trent shares closed 0.16% higher at ₹3,110 on Wednesday on the BSE.

Expansion vs productivity

During the quarter, Trent added 22 Zudio stores and one Westside store, while consolidating three Zudio outlets. It entered nine new cities, taking its portfolio to 301 Westside stores, 982 Zudio stores, including seven in the United Arab Emirates, and 29 stores across other lifestyle concepts. Overall, the retailer now operates more than 1,300 large-format fashion stores across 330 cities, with a retail footprint exceeding 18 million sq. ft.

More than 80% of new Zudio stores opened during the quarter were in tier II and tier III cities and peripheral growth markets, reflecting the company's strategy of expanding beyond metros. Trent said newer markets typically take two to three years to mature.

However, like-for-like growth in the fashion business remained in the low single digits, indicating that revenue growth continued to be driven primarily by new store additions rather than higher productivity at existing outlets. Emerging businesses, including beauty and personal care, innerwear and footwear, contributed more than 21% of revenue, while online sales accounted for over 6% of Westside's revenue during the quarter.

Its grocery business, Star, added five stores during the quarter, taking the network to 86 stores across 12 cities. Own brands now account for more than 73% of Star's revenue, helping improve store-level economics.

Sandeep Abhange, research analyst, consumer and midcaps at LKP Securities, said Trent delivered a profitability-led quarter, with standalone revenue rising 19%, operating Ebitda increasing 36% and net profit growing 26%, supported by a 140-basis-point expansion in Ebit margin to 12.9%.

“However, the quality of growth remains the key monitorable, with like-for-like growth staying in the low single digits, indicating that growth is being driven largely by new store additions rather than higher productivity from existing stores. While expansion into tier II and tier III markets and emerging categories like beauty, footwear and innerwear continue to support margins, sustaining Trent's premium valuation will require a meaningful improvement in same-store demand alongside continued store expansion,” he said.