Trent Ltd is enjoying optimism around a rebound in demand as the economy opens up. The retailer’s stock is down nearly 7% from its 52-week high 1346.85 each seen on 7 April. Trent’s operations are expected to be supported by growth in stores, improving customer base and declining demand.
“Trent growth over the past few years has been spectacular to say the least, with 15% growth in FY20-22E despite the impact of the Covid-19 pandemic. Its footprint addition is strong (27% on FY20-22E) and well ahead of the industry, said analysts at Motilal Oswal Financial Services in a report on April 18.
Westside recently opened its 200th store and Zoodio’s stores currently number over 200. These two store formats have seen better recovery and have achieved budgeted sales in the last two months with strong growth as compared to pre-Covid levels, note analysts at Motilal. Oswal on the basis of checking his channel. This could be due to the high fashion quotient at Westside and Zoodio, which support demand amid an environment of high inflation.
“Six months old zoodio stores are earning an annual revenue run-rate of Rs 10 crore, i.e. Rs 14-15k/sq. ft., about 20-30% more than a similarly sized store. This is because of its vibrant product design and fast pricing with an average selling price of Rs 300 and all the products in the store under Rs 1,000.”
Trent is expected to announce the March quarter (Q4FY22) results next week. Analysts at ICICI Securities expect revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) to grow 48% and 26% year-on-year, respectively. However, on a sequential basis, revenue and EBITDA are projected to decline 15% and 41%, respectively, due to the impact of Omicron at the beginning of the quarter.
To be sure, resurgence in COVID cases may pose a risk of recovery. Further, increase in input cost may prompt apparel retailers to resort to hike in prices, which will impact demand. Further, analysts at Motilal Oswal note that a possible GST (goods and services tax) rate hike from 5% to 12% could impact demand, especially in the price-sensitive price retail segment.