Driven by extensive store expansions, the apparel retailer has recorded notable growth in terms of revenue. Providing perspective, Trent’s standalone revenue has witnessed a substantial 32 per cent increase in FY ’23, based on a four-year compound annual growth rate.
Both of its key formats, Westside and Zudio, showcased strong performance during FY ’23. Zudio represents Trent’s value fashion concept, while Westside serves as the company’s flagship format.
Zudio’s impressive store expansion, reaching 119 cities, has contributed to investor excitement, surpassing Westside’s presence in 90 cities. Trent has further guided for 200 store additions in Zudio and 30 store additions in Westside for the current fiscal year.
Trent plans to expand its other formats, Misbu and Samoh, with Samoh focusing on ethnic wear and adding 10 stores in FY ’24. Zudio remains a crucial growth driver for Trent, while the success of these new formats is yet to be determined.
Analysts expect Zudio to continue driving Trent’s growth, with its value-retail opportunity being larger and forming a strong foundation for future expansion, according to Nuvama Research.
Investors should monitor Zudio’s margins given the significant store additions planned, although its FY ’23 EBIT (Earnings Before Interest And Taxes) margin increased to 7 per cent without hindering expansion. Westside achieved a multi-year high margin of 11 per cent in FY ’23.
However, the growing prominence of Zudio, catering to lower price points, may pressure overall margins. Trent’s margin performance has fallen short of analyst expectations in recent quarters, with standalone gross margin declining to 45.4 per cent in FY ’23.
Return on equity and return on capital employed improved in FY ’23 due to core business earnings and the performance of Trent Hypermarket and Zara, according to Motilal Oswal Financial Services. The contribution of new stores will take time to become significant.
