Fashion and retail chain Trent Ltd has just had another tough quarter: Revenue growth continued to slow, and its entry into smaller cities may carry a price. On Monday, shares of the Tata Group company sank over 7% to hit a new 52-week low of ₹4,262.60, on a day when the Nifty50 index rose 0.5%. The disappointing results in the September quarter (Q2FY26) prompted some analysts to trim their earnings projections, given uncertainty on the timeline of growth recovery amid dull demand and stiff competition.
For the fifth straight quarter, Trent’s Q2 standalone revenue growth decelerated, highlighting the company’s struggle to boost sales adequately. Revenue increased 17% year-on-year to ₹4,724 crore, with low single-digit like-for-like growth in its fashion portfolio. Relatively muted consumer sentiment and unseasonal rains were the main villains last quarter. Trent said customers initially appeared to have prioritized bigger-ticket product purchases after goods and services tax (GST) rates were cut.
Trent is expanding in tier 2/3 markets and emerging catchments near metros, which bring vast opportunities. However, these markets are still evolving on fashion trends’ adoption and consumption density. They are expected to mature at varied paces; so, the revenue profile and growth trajectory of such stores may not be fully comparable with the company’s existing portfolio. This could mean growth rates may moderate further.
On the brighter side, Trent’s cost control efforts are notable. While gross margin contracted 88 basis points (bps) year-on-year in Q2 to 43.3%, reported Ebitda margin expanded 134 bps to 17.2%, thus softening the blow on overall earnings growth. Staff costs were flattish last quarter, led by RFID technology, or the electronic tagging of goods. Notwithstanding Q2’s higher Ebitda margin, a steep 65% rise in depreciation took a toll on profit after tax, which was up just 6.5% to ₹451 crore.
“Despite weak same-store-sale-growth, Trent is managing margins by cutting employee and other costs. While positive, these are unlikely to sustain,” said Kotak Institutional Equities’ analysts.
They added: “Higher capex may weigh on cash generation. We trim FY26-28 earnings-per-share estimates sharply by 7-14%, as we model lower revenues and higher costs.”
Meanwhile, emerging categories, including beauty & personal care, footwear and innerwear contributed over 21% of Q2FY26 revenues. Store additions picked up pace sequentially after a subdued Q1, with Trent net opening 13 Westside and 40 Zudio stores in Q2. Total store portfolio as on 30 September included 261 Westside, 806 Zudio (including three stores in the UAE) and 34 stores across other lifestyle concepts. Online revenues grew 56% in Q2FY26 and contributed to over 6% of Westside revenues.
Last quarter, Trent launched ‘Burnt Toast,’ a youth-focused fashion brand with a range of bold apparel and accessories. It said the initial customer response was encouraging. Revenues of the supermarket concept Star fell 2% last quarter as multiple stores underwent upgrades.
Overall, Trent believes demand traction over the medium term would support small-ticket discretionary lifestyle categories as well. For the stock to re-rate, investors will need proof in the form of improving growth rates. In this context, store additions are a variable to track. The progress of newer formats is another.
The Trent stock has corrected in the past six months, given earnings downgrade and growth moderation, said Jefferies India. Trent’s shares are down 42% from 52-week highs of ₹7,493.05 seen on 3 January. “We are unsure whether the worst is over; hence, we stay on the sidelines,” wrote Jefferies’ analysts in a 9 November report, stating that they maintain their ‘Hold’ rating on the stock with a lower price target of ₹5,000.
