Tata Group's retail subsidiary, Trent Ltd, announced a nearly threefold increase in its net profit for Q2 FY24, reaching ₹228 crore ($30.6 million), driven by a robust growth in revenues. The announcement led to a 2% rise in the company's shares for two consecutive days.
The company's consolidated revenues saw a year-on-year increase of 52.7%, amounting to ₹2,982 crore ($400.9 million), with the net income for Q2 FY24 standing at ₹3,062 crore ($411.5 million). This significant growth was primarily due to a more than doubling of revenues from Zudio, Trent's value fashion brand, resulting from store expansion and a 50% increase in the store base. Westside, another Trent brand, also contributed with over 20% growth in revenues.
Trent's profit after tax (PAT) growth is partially attributed to franchise-driven expansion in Zudio. The company's EBITDA saw a 78.5% increase from a year ago to ₹456.57 crore ($61.3 million), pushing the EBITDA margin to 15.3% from 13% year-on-year.
As of September 30, Trent’s portfolio included 223 Westside stores, 411 Zudio stores, and 27 stores across other lifestyle concepts. In Q2FY24, six Westside and 27 Zudio stores were added while four outlets in each format were closed. Emerging categories such as beauty and personal care, innerwear, and footwear accounted for over 19 percent of standalone revenue.
The Star business, another Trent brand, experienced increased customer traction with growing sales densities, reflecting a 30 percent operating revenue growth in Q2FY24 compared to the previous corresponding period due to the Star format improvement.
Despite Trent being a structural story on India's growing organized apparel market, Jefferies maintained a hold on it due to expensive valuations. Nuvama Institutional Equities upheld a Buy rating with the target price revised to ₹2,855 from ₹2,119. Kotak Institutional Equities maintained an 'add' rating with a revised target price of ₹2,700.
Trent's Zara JV is expected to see strong recovery on both the revenue and margin fronts. However, aggressive competition from e-commerce majors poses a challenge. Increased losses in subsidiaries are also a significant concern.
Lower than expected rental costs due to rental renegotiation contributed to the surprising growth in EBITDA and profit. The general merchandise and apparel mix increased to 32 percent compared to 27 percent in Q2FY23. Operating leverage also played a significant role in the company's robust performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.