Shares of retail company, Trent Ltd., are down 19% from their 52-week high as seen on the National Stock Exchange on April 7. Despite this, investors have made decent gains from a slightly longer-term perspective, with the stock rising as much as 24% over the past year.
Thus, Trent has performed well in FY 2022 (FY22), registering a remarkable 90% year-on-year (YoY) growth in standalone revenue. A favorable base has helped growth as revenues declined in FY11. Still, FY22 revenue 3,881 crore representing a compound annual growth rate of around 11% in FY15.
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It helps that FY23 has got off to a good start. Announcing its March quarter results on April 27, Trent stated that Westside had then ordered higher than the annual revenue run-rate. 5,000 crores.
According to a survey by the Retailers Association of India (RAI), the retail sector has done well in April. Checking out our channel shows that the subscriber count has been good in May as well. Also, the wedding season will boost demand,” said Akhil Parekh, analyst at Centrum Broking.
“Trent’s execution has been strong. In recent years, it has generated decent growth in same-store sales, especially for Westside stores,” Parekh said.
Store additions will also generate incremental revenue. In fiscal 2012, the company added over 125 new stores, bringing a total of 435 stores to its fashion portfolio under the Westside and Zoodio formats. Zudio Trent has a value retail format and is expected to be a significant revenue growth driver for the company. Motilal Oswal Financial Services expects Zoodio’s revenue to grow 3x in the next two years 3,300 crore from 1,100 crore in FY22.
“Trent’s successful store performance, healthy store economics and aggressive growth strategy provide a huge runway for growth over the next three to five years,” the brokerage said.
Meanwhile, the stock has outperformed the Nifty 500 index so far this calendar year, indicating that investors are factoring in optimism.
Motilal Oswal’s target price is 1,430 each for Trent stock. Of course, if demand slows down due to lower discretionary spending, it will adversely affect investor sentiment. Investors will also have to observe the impact of higher input costs on margins and consumer demand.
“Macro risks such as a possible slowdown in the economy will hurt the company,” Parekh said.