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Business News/ Markets / Mark To Market/  Trent’s Q1 marred by second covid wave; stock down 8% post results
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Trent’s Q1 marred by second covid wave; stock down 8% post results

Trent’s fashion business operated for just 46% of trading days, although this was up from 26% in Q1FY21. This measure stood at 80% for the March quarter. The upshot: the company swung to operating losses in Q1FY22 from profit in January-March

Trent Ltd operates Westside and Zara stores in India. (Photo: Mint)Premium
Trent Ltd operates Westside and Zara stores in India. (Photo: Mint)

Trent Ltd’s June quarter results (Q1FY22) show that the recovery being witnessed following the easing of the first lockdown last year has paused. After all, standalone revenues declined as much as 58% vis-à-vis the March quarter. Of course, year-on-year growth numbers were exceptionally high given the low base.

The company’s fashion business (Westside and Zudio) operated for just 46% of the trading days, although this was up from 26% in Q1FY21. This measure stood at 80% for the March quarter.

The upshot: the company swung to operating losses in Q1FY22 against a profit in the March quarter. Earnings before interest, tax, depreciation and amortization (Ebitda) loss for Q1FY22 stood at nearly Rs32 crore, from a profit of Rs137 crore during Q4FY21.

“Trent mirrored the sector weakness in the wake of covid restrictions and reported loss at Ebitda along with below normal revenue trend (year-on-year strong)," said analysts from Jefferies India Pvt. Ltd in a report on 10 August. Even so, Trent adopted various cost mitigation measures, which helped curtail losses year-on-year.

After the results, shares of Trent fell around 8% to Rs875 apiece on Wednesday on the National Stock Exchange. To be sure, analysts point out that the company’s results are broadly in-line. Note that the company’s existing chief executive officer (CEO), Stephen Rayfield has resigned. Chief financial officer P. Venkatesalu has been appointed CEO, effective October 2021 for three years.

Meanwhile, the Trent stock had run up sharply in recent months, touching a new 52-week high of Rs969 per share. As such, valuations were not exactly cheap and some correction was on the cards, said analysts.

Moving ahead, the company is again on a recovery path with second wave-led restrictions easing. “We are witnessing a sharp recovery in our fashion business with July registering revenue recovery of over 80% vis-à-vis FY20 levels. Post the first wave, this level of recovery only played out several months following the reopening," said Trent in its press release.

Jefferies analysts reckon, Trent benefits from re-opening but this is partially captured in the share price rally in the past three months (before Wednesday’s trade). The broker has downgraded the rating on the stock to ‘hold’ and has a target price of Rs870 per share.


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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi Pengonda is a financial journalist producing cutting edge commentary and analysis on companies, economy and market trends. Over her journalism career spanning more than 14 years, she has covered topics across sectors such as oil & gas, consumer, aviation and new age tech companies. She heads the Mark to Market team and joined Mint in June 2010. She lives in Bengaluru. She is an art enthusiast and likes to paint in her leisure time.
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Updated: 11 Aug 2021, 12:12 PM IST
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