PremiumTrent 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.
