Trent, the retail arm of the Tata Group, slid another 1% in Tuesday’s trade (July 8), closing at ₹5,440, taking its three-day loss to 12% and marking a 35% decline from its November peak of ₹8,345 apiece.
After gaining ground from its April lows and posting gains over the following two months, the stock reversed its bullish streak in early July as investor sentiment weakened following management commentary about slower near-term growth in its core fashion business—the key driver of growth in recent quarters.
Trent expects slower standalone revenue growth in Q1FY26
At its 73rd Annual General Meeting (AGM), Trent lowered its near-term growth expectations, projecting a 20% growth in its core fashion segment for the first quarter of the current fiscal year—well below its five-year CAGR of 35% (FY20–25). The company attributed the slowdown to a weak consumption environment, geopolitical headwinds, supply-side constraints, and the early onset of monsoons.
While some of these challenges are seen as one-off, domestic brokerage firm Kotak Institutional Equities expressed concern over the faster-than-expected decline in revenue throughput. The brokerage pointed out that the company’s revenue trajectory continues to weaken—from a strong 57% YoY growth in 1QFY25 to 29% in 4QFY25 and further down to 20% in 1QFY26.
Apart from the one-off factors cited by the company, Kotak believes the contraction also stems from higher store densities in key cities, which are impacting per-store revenue, and from new store openings in Tier 2 cities, where throughput remains lower. This has led the brokerage to factor in revenue throughput contraction for FY2026.
Trent added only one Zudio store and no new Westside stores in 1QFY26. While store additions fell short of expectations, Kotak is not overly concerned, as it anticipates a pickup in the second half of FY26, with most additions likely in the fourth quarter.
The brokerage projects the addition of 6 Westside stores and 225 Zudio stores in FY2026—slightly higher than the 6 and 220 stores added, respectively, in FY2025.
Brokerages trim price targets on soft projections
While analysts have retained their optimistic view on the company’s long-term growth prospects, short-term hiccups have led them to cut earnings estimates. The sharp run-up in the stock price in recent years has also made valuations stretched. Kotak Institutional Equities cut its target price to ₹5,300 from ₹5,400 earlier, while retaining its ‘reduce’ call on the stock.
“Trent undoubtedly remains a strong retail operator, with its Westside and Zudio formats gaining market share not only in apparel but also in ancillary categories such as innerwear, beauty, and footwear. The stock, however, is priced to perfection and is trading at 62X core FY2027 P/E, leaving limited scope for disappointments on growth,” said Kotak.
Similarly, Nuvama Institutional Equities trimmed its target price to ₹5,884 from ₹6,627 apiece while maintaining its ‘hold’ rating, and HSBC reduced its price target to ₹6,600 but maintained a ‘buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
