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Trent Ltd is enjoying the optimism surrounding the rebound in demand as the economy opens up. The retailer’s shares are just about 7% lower from the 52-week high of 1346.85 apiece seen on 7 April. Store additions, recovering footfall and pent-up demand are likely to support Trent’s operations.

“Trent’s growth in the last couple of years has been stupendous to say the least, growing at 15% over FY20-22E despite the impact of the covid-19 pandemic. Its footprint addition has been strong (27% over FY20-22E) and much ahead of the industry," said analysts at Motilal Oswal Financial Services in a report on 18 April.

Westside recently opened its 200th store and Zudio’s store count currently stands over 200. These two store formats have seen a better recovery and achieved budgeted sales with strong growth in the last two months vis-a-vis pre-covid levels, note analysts at Motilal Oswal based on their channel checks. This could be due to the high fashion quotient in Westside and Zudio, which supports demand amid a high inflationary environment.

“Six-month-old Zudio stores are garnering an annualized revenue run-rate of Rs10 crore, i.e. Rs14-15k/sq. ft., nearly 20-30% more than stores of a similar size. This is due to its vibrant product designs and sharp pricing with an average selling price of Rs300 and all products in the store priced below Rs1,000," added the Motilal Oswal report.

Trent is expected to announce the March quarter (Q4FY22) results next week. Analysts at ICICI Securities expect revenue and Ebitda (earnings before interest, tax, depreciation and amortization) to grow by 48% and 26% year-on-year respectively. However, on a sequential basis, revenue and Ebitda are estimated to decline by 15% and 41% respectively owing to the impact of Omicron at the beginning of the quarter.

To be sure, the resurgence in covid cases could pose a risk to the recovery. Also, the increase in input costs could push apparel retailers to resort to price hikes which would weigh on demand. Further, Motilal Oswal analysts note that potential GST (goods and service tax) rate hike on apparels to 12% from 5% can impact demand, particularly in the price-sensitive value retail segment.

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