Trent Ltd’s tapering growth rates have been a sore point for its investors. The recent goods and services tax (GST) overhaul is also not expected to boost growth materially in the near future.
The GST rate on apparel priced between ₹1,000 and ₹2,500 has been cut to 5% from 12% earlier. For apparel priced over ₹2,500, the GST rate has been raised to 18% from 12%. “Westside, which we expect to contribute 35% of Trent’s standalone revenues in FY26, will witness GST benefits to an extent, although we expect Trent to pass on the entire GST benefit to consumers,” said Kotak Institutional Equities’ analysts in a report on 10 September.
Nearly all of Zudio’s merchandise is priced below ₹1,000 per piece, and it will not witness any change from GST rate cuts, added the broking firm.
So, while the GST cuts could positively impact a relatively smaller portion of Trent’s sales, the overall impact on the fashion retailer’s near-term revenue growth could be limited. Westside offers apparel, footwear, and accessories, along with furnishings, decor and a range of home accessories, while Zudio is Trent’s value retail fashion format.
Trent’s standalone revenue in the June quarter (Q1FY26) came in at ₹4,781 crore, up 20% year-on-year, which looks good in isolation, but is at a multi-quarter low. Q1 also marked the fourth straight quarter of on-year drop in growth. Investors have noted, taking the stock down 38% from its 52-week high of ₹8,345 seen on 14 October 2024.
However, Trent’s Q1 pre-tax and exceptional item earnings grew at a slightly faster pace of 23.5% year-on-year to ₹555 crore. This was aided by Ebitda margin expansion of 223 basis points (bps) to 17.5% as employee costs declined by almost 7%. Broadly, analysts expect Trent’s Ebitda margin to increase in FY26 versus FY25. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.
Hopes from the second quarter
“We expect growth to pick up in Q2FY26 as the geopolitical tension impact wanes and part of the supply chain issue has been resolved,” said analysts from HSBC Securities and Capital Markets (India) in a 22 August report. The broking firm sees growth improving to 26% in Q2FY26.
HSBC has valued Trent’s standalone businesses (Zudio and Westside account for 99% of revenue) at an industry-leading target price-to-earnings multiple of 75X on trailing 12 months through June 2027 estimated earnings per share. The other JVs are valued on an EV/sales basis to arrive at HSBC’s sum-of-the-parts derived target price of ₹6,500. Currently, Trent’s shares are trading at around ₹5,132 apiece.
To be sure, revenue growth acceleration remains a key trigger for the stock. However, this may not happen in a hurry, as broader discretionary demand remains soft. Kotak has trimmed FY26-28 revenue estimates by about 2%, as it models weaker same-store-sales growth across both Westside and Zudio.
“Same-store-sales growth print may remain contingent on the company’s new store addition strategy, and store additions within the same cities may weigh on this figure,” points out Kotak.
