Trent shares tumble 7% post 'soft Q2'; Goldman Sachs slashes earnings estimates

The stock slipped as much as 6.83% to ₹4,311 apiece in the opening deals.

The primary customer propositions of Trent include Westside, one of India's leading chains of fashion retail stores, Zudio, and Star, which operate in the competitive food, grocery, and daily needs segment.

On Friday, November 7, the company reported a 16% YoY rise in its consolidated revenues for the quarter under review at ₹5,107 crore, while operating profit, or EBITDA, increased by 14% YoY to ₹575 crore. Its profit after tax (PAT) came in at ₹373 crore, up 11% YoY.

In its press release, Trent said that, given the accounting standards, its consolidated revenues do not include revenues of the Trent Hypermarket business. However, the reported results include the proportionate share of profitability of this venture and are accounted for based on the equity method.

The Star business consists of 77 stores, including the addition of three stores and the closure of four stores during the first half year. "We are pursuing multiple interventions, including on the technology front, aimed at driving differentiation and convenience of our customer proposition," it added.

It further said, "Competitive price points, strong availability, and differentiated fresh offerings, coupled with a growing assortment of own-branded products, differentiate Star's proposition and help mitigate competitive trends in this space."

Trent Q2: Standalone numbers

On a standalone basis, revenues, including GST, jumped 17% YoY to ₹5,002 crore, while EBITDA stood at ₹575, up 16% YoY. PAT saw a rise of 6% YoY to ₹451 crore.

In its press release, the company said that during the quarter, it launched its new youth-focused fashion brand, Burnt Toast, "with a range of bold apparel and accessories, aimed at inspiring young, dynamic individuals to express themselves. The initial customer response has been positive and encouraging."

It added, "We now operate a significant portfolio of over 1000 'large-box' fashion stores, with a presence now across 251 cities. In Q2 FY26, we opened 19 Westside and 44 Zudio stores (including 1 store in the UAE) and consolidated 6 Westside & 4 Zudio stores. As of September 30, our store portfolio included 261 Westside, 806 Zudio (including 3 stores in the UAE), and 34 stores across other lifestyle concepts. As of September 30, we operated with a footprint of over 14 million sq. ft. across our fashion brands."

Operating EBIT margin for Q2FY26 fell to 10.2% (11.0% for Q2FY25).

Trent Q2: Key points

• In its investor presentation, the company is adding presence in newer cities across tier 2 / 3 markets, as well as emerging catchments in the proximity of metro cities. Many of these markets are still evolving in terms of the adoption of fashion trends and the density of consumption.

"These markets afford substantial opportunities, and at the same time, we expect them to mature over differing time horizons. Hence, the revenue profile and the growth trajectory of such stores may not be entirely comparable with that of the existing portfolio," Trent said.

• Like-for-like growth for its fashion portfolio in Q2 FY26 was in low single digits. The emerging categories, including beauty & personal care, innerwear, and footwear, contribute to over 21% of our revenues.

• "Westside.com, together with our proposition on the Tata Neu platform, continues to witness traction and grow profitably. In Q2FY26, online revenues grew by 56% and contributed to over 6% of Westside revenues. Westside Online is a unique convenience proposition and is entirely consistent with the approach adopted by the brand in stores, in terms of the product proposition as well as disciplines around pricing, end-of-season sales, and returns. Amongst standalone brands, Westside today registers some of the highest volumes online vis-à-vis comparative players in the Indian market."

• The consumer sentiment in the second quarter was relatively muted, and "we also witnessed headwinds given unseasonal rains. The quarter also saw the transition to the new GST regime. Initially, the customers appear to have prioritised the purchase of bigger ticket products with higher GST reduction benefits. Nevertheless, over the medium term, we believe demand traction would also be aided for small ticket discretionary lifestyle categories," the company said.

What management said

Speaking on the performance, Noel N Tata, Chairman, Trent Limited, said, “We remain focused on portfolio growth, elevating our products and enhancing store experience for our customers. Reduction in GST rates is a welcome step and over time is likely to augur well for our product categories. The business registered steady performance during the quarter."

Noel added, "We have consistently delivered a differentiated consumer proposition that appeals to a wider audience across diverse markets. Notwithstanding continuing competitive intensity and interim trends, we believe an unwavering focus on being relevant to our customers and building resilience with our business model choices will continue to hold us in good stead."

The chairman added that they are excited and remain on track to build a sizable and scalable pure-play direct-to-customer business across customer segments in the context of the market size and opportunity.

"In our Star business, we continue to apply Trent’s playbook, and the contribution of our own brands is now trending over 73% of revenues. The opportunity in the food space for the Star proposition is exciting; at the same time, it is intensely competitive. We remain convinced that this business is well poised to deliver growing consumer value in the years ahead," Noel added.

What leading analysts say

According to news reports, most analysts are cautious after the company's soft quarter. Citi, for instance, as per the reports, said that with overall consumption trends remaining weak, coupled with increasing competition, cannibalisation, and aggressive expansion in Tier-2 and Tier-3 markets, Trent's growth rate is likely to moderate further.

Goldman Sachs said operating EBIT growth of 9% year-on-year in the second quarter was below expectations, as sales were impacted by unseasonal rains and consumers prioritising big-ticket purchases following the GST rate reduction.

Goldman added that the company's automation investments are helping limit the profitability impact despite weak like-for-like (LFL) growth, though margin benefits are likely to be absorbed in the base by the fourth quarter. The financial services firm cut its earnings estimates by around 6%.

Jefferies, as per news reports, said that revenue growth decelerated to 17%, marking a multi-quarter low.

“Operating EBITDA margins remained nearly flat, resulting in growth that was broadly in line with revenue. While gross margins declined, the impact was offset by lower staff and other costs, supported by productivity and automation initiatives," CNBC-TV18 reported, quoting analysts at Jefferies as saying.