Aniket PujariHowever, it has also been the worst-performing Nifty 50 stock so far this year – down about 26% since 1 January – making investors jittery. The company’s enterprise-value-to-Ebitda ratio (EV/Ebitda) fell from 78.5 in FY24 to 67.6 in FY25, and is expected to decline further to 51 in FY26, according to Bloomberg data.
Jay Gandhi, an analyst at HDFC Securities, noted the stock’s surge from around ₹2,000 in August 2023 to more than ₹8,000 in October 2024 was powered by aggressive expansion and rising productivity of Zudio stores — both of which are now losing steam, leading to the correction. Zudio is Trent’s fast-fashion brand that offers affordable clothing to budget-conscious customers.
Also read: Trent stands tall even as growth momentum cools
After peaking at ₹8,345 last October, the stock now trades around ₹5,200 amid a broader market correction. “Any meaningful correction from hereon has to be Zudio-led,” Gandhi said, adding that growing competition from rivals, who are launching similar stores, could also increase the pressure on the stock.
However, he also said Trent’s long-term growth will be driven largely by Zudio, followed by Star — a chain of supermarkets and hypermarkets that has significant potential to fuel further upside if scaled effectively.
Zudio giveth, and Zudio taketh away
The stock has been on a roll since August 2023, driven by a rapid increase in the number of Zudio stores – from 168 at the end of 2021 to 635 at the end of 2024. The number of Westside stores grew from 194 to 238 over the same period.
Trent has continued to deliver impressive results, with revenue up 42% year-on-year so far in FY25 and net profit up 60% to ₹1,222.81 crore. But the pace of Zudio and Westside store expansions and same-store sales growth this fiscal year has disappointed investors.
According to a Kotak Institutional Equities report dated 10 March, Trent’s Westside store locator initially showed it had 269 such stores, which was later corrected to 240, reflecting a net addition of just eight stores so far in FY25. The brokerage estimated the store count would be 243 by the end of FY25, implying a net addition of just 11 stores in the fiscal year — well below the 26, 14, and 18 net additions in FY22, FY23 and FY24, respectively.
Biggest isn’t always better
The company closed 21 Westside stores in the first nine months of FY25, replacing them with larger outlets that it believes offer a better shopping experience. However, larger stores typically take longer to mature and generate lower sales per square foot, which could weigh on same-store sales growth in the near term but should pay off in the long run.
Also read: ‘Westside lessons helped Zudio; selling apparel online inefficient’
“We believe this resulted in a relatively subdued revenue throughput increase of 2% year-on-year for Westside and may remain a drag going forward as well,” said the Kotak analysts.
Zudio’s store count currently stands at 675, implying a net addition of 130 stores so far in FY25 – well below the 190-200 that were expected, the brokerage said. “Similar to Westside, the new Zudio stores are also larger. Area addition thus is in line with expectations, though similar to Westside, the throughput increase may not be material,” it said.
‘No major issues’
“There’s nothing majorly wrong with Trent,” said Soham Samanta, research analyst at Centrum Broking. He called the Tata Group company a 40% compound annual growth rate (CAGR) story but noted that Zudio — which accounts for about 55% of Trent’s consolidated sales — has seen its growth prospects cool from more than 40% to around 35% in the past nine months. This slowdown has dragged valuations down, leading to the sharp correction in the stock.
Meanwhile, management is playing it safe with a measured pace of growth, he said. Going forward, key factors to track include Zudio’s sales growth, like-for-like sales growth, store expansion, and the margin performance of Star, Samanta added. He said he was bullish on Trent’s multi-pronged growth strategy and strong operating performance, but warned that slower store additions at Zudio could be a drag on the stock. A slowdown in consumer demand is another key near-term risk to the company’s earnings.
Also read: Behind Trent’s trend-defying performance
For now, Trent is focusing on organic growth by building its own brands such as Misbu, Samoh and Utsa, while expanding into beauty (Zudio Beauty) and lab-grown diamonds (Pome). Rival company Aditya Birla Fashion and Retail Ltd is dealing with acquisition-related challenges, while VMart is working on a turnaround.
