Trent's Q4 Success Surpasses Expectations, Brokerages Raise Targets

Tata Group shares retailer Trent, which have surged nearly 500% in three years, jumping 6% in Tuesday's early trade on BSE to a lifetime-high of ₹4,628 after brokerages raised target prices following a five-time surge in March quarter net profit to ₹654.28 crore, as compared to ₹105.13 crore in the fourth quarter last year.

At 9:27 am, the Trent shares were trading 6.24% higher at ₹4,583.30. The stock has more than tripled over the last 12 months.

The lifestyle retail arm that runs Westside and Zudio reported a revenue of ₹3,298 crore, up 51% year-on-year (YoY) from ₹2,183 crore reported by the company in Q4FY23. The Tata Group company reported a 53.4% surge in its consolidated revenue for the January-March quarter, at ₹3,187 crore.

Trent's Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for the quarter stood at ₹477 crore, compared to ₹211 crore last year, while the margin also expanded by nearly 500 basis points to 15% from 10.2% last year. As of March 31, Trent's portfolio included 232 Westside stores, 545 Zudio outlets and 34 stores across other lifestyle concepts. Trent's Fashion concepts saw like-for-like growth of over 10% compared to the year-ago quarter.

Trent's Star business continued to witness improved customer traction with growing sales densities. The business registered operating revenue growth of 30% in the March quarter. "We are confident that this business is well poised to shift gears and deliver substantial value to customers and shareholders going forward," Trent Chairman Noel Tata was quoted as saying.

In its notes to account, Trent highlighted that it had entered into a substantial number of lease contracts, mostly for its store operations and that it had reassessed the estimates of measurement and recognition of the right to use assets and corresponding lease liabilities, which resulted in the exceptional gain.

"Given the accounting standards, the consolidated top line does not include revenues for our Trent Hypermarket business. Nevertheless, the results include a proportionate share of the profitability of this venture accounted basis the equity method, the company said. "The gross margin profile of Westside and Zudio continue to remain consistent with earlier trends. Overall, Operating EBIT margin for Q4FY24 was 8.2%," it added.

Customers are extremely positive on Trent's offerings as it absorbed the impact of high raw material prices in the previous fiscal year. This led to strong customer retention and Trent is also reaping the benefits of RM prices turning benign since footfalls continue to surged.

According to Nuvama Institutional Equities, the growth in PAT was a factor of the franchise-driven expansion in Zudio. Nuvama increased its target price on Trent to ₹4,926, up from ₹4,304 while keeping its ‘Buy’ call.

US-based brokerage firm Jefferies increased its target price to ₹4,150 per share, but retained its ‘Hold’ call. According to the international brokerage, the strong quarter was a result of surging LFL growth and store adds. The management's confidence growth seems high, added the brokerage.