Trent Ltd. reports 53% y-o-y (YoY) growth in standalone revenue from operations 1185 crore in the March quarter (Q4FY22). This is despite the adverse impact of the third wave in January and February.
Sequentially, however, revenue declined 12%. In addition, gross margin declined by 400 basis points (bps) to 49%, due to lower full price participation in the January ‘end of season sale’. One basis point is 0.01%.
While revenue was ahead of analysts’ estimates at ICICI Securities, EBITDA (earnings before interest, taxes, depreciation and amortization) on 152 crores, less than expected. This means EBITDA margin decreased by 480bps to 13% as employee spending increased by 48%. Apart from this, higher costs due to lower rental discounts and store additions were also impacted, analysts at ICICI Securities said in a report on April 28. Management noted that margins have improved since March and are in line with trends seen in the third quarter.
trent Westside recently opened its 200th store, adding over 125 stores in FY22. In Q4, Westside registered similar growth of 16% and 21% as compared to Q4FY20 and Q4FY21 levels respectively, though both these bases were partially impacted by the COVID waves. According to the management, the current annual revenue run rate of Westside is more than Rs 5000 crore. Westside’s online channels constituted 7% of Westside revenue and grew 74% in fiscal 2012. The online presence is likely to grow further through the recently launched Tata Neu app.
Note that revenues registered a CAGR of over 15% over the three-year period (FY19-FY22), notwithstanding the second and third Covid waves impacting operations in FY22. CAGR is the compound annual growth rate
“We are targeting our store additions for Westside and adjusting same-store sales growth, in which we are increasing FY24E EBITDA by 20%. Our estimate for Westside for FY23 is still lower than the current Rs 5,000 crore run-rate highlighted by the management, analysts at Edelweiss Securities Ltd said in a report on April 27.
Meanwhile, Trent shares have gained 15% so far in calendar year 2022, while the Nifty 500 index fell 1% in the same period. Valuations are expensive which can limit meaningful upside in the near term. As the footfall recovers, the outlook for the company is promising. However, weak discretionary demand or further lockdown restrictions pose a threat to recovery.