Tata Group's fashion and retail chain Trent Ltd is navigating turbulent waters as the company reported another challenging quarter with continued revenue growth deceleration. The disappointing September quarter results sent shockwaves through the market, with shares sinking over 7% to hit a fresh 52-week low of ₹4,262.60.
Quarterly Performance Highlights Persistent Challenges
The September quarter (Q2FY26) marked the fifth consecutive period of slowing revenue growth for Trent, highlighting the company's ongoing struggle to boost sales in a competitive retail environment. Revenue increased 17% year-on-year to ₹4,724 crore, but this growth came with concerning underlying trends.
The company's fashion portfolio recorded low single-digit like-for-like growth, indicating weak comparable store performance. Analysts identified relatively muted consumer sentiment and unseasonal rains as primary factors affecting last quarter's results. Interestingly, Trent noted that customers appeared to prioritize bigger-ticket product purchases following recent goods and services tax (GST) rate cuts.
While profit after tax showed a modest increase of 6.5% to ₹451 crore, this figure disappointed market expectations. The modest profit growth came despite a 134 basis points expansion in reported Ebitda margin to 17.2%, as a steep 65% rise in depreciation costs took a significant toll on bottom-line performance.
Expansion Strategy Faces Market Realities
Trent's aggressive expansion into tier 2 and tier 3 markets, along with emerging catchments near metropolitan areas, represents both a significant opportunity and a substantial challenge. These new markets offer vast potential for growth but come with their own set of complexities.
The company net opened 13 Westside and 40 Zudio stores during Q2, showing a pickup in expansion pace after a subdued first quarter. As of September 30, Trent's total store portfolio included 261 Westside, 806 Zudio (including three stores in the UAE), and 34 stores across other lifestyle concepts.
However, company officials acknowledge that these newer markets are still evolving in terms of fashion trend adoption and consumption density. The varied maturation pace across different locations means the revenue profile and growth trajectory of these stores may not immediately match the company's existing portfolio performance.
Cost Control Efforts and Emerging Categories Show Promise
Amid the growth challenges, Trent demonstrated notable cost management capabilities. While gross margin contracted 88 basis points year-on-year to 43.3%, the company's focus on efficiency helped expand overall Ebitda margins. Staff costs remained flattish last quarter, partly attributed to the implementation of RFID technology for electronic tagging of goods.
Emerging categories including beauty & personal care, footwear and innerwear contributed over 21% of Q2FY26 revenues, showing diversification benefits. The company also saw encouraging initial customer response to its newly launched youth-focused fashion brand 'Burnt Toast,' which features bold apparel and accessories.
Online revenues grew impressively by 56% in Q2FY26 and contributed over 6% of Westside revenues, indicating strong digital adoption among customers.
Analyst Sentiment and Stock Performance
The disappointing results prompted several analyst firms to trim their earnings projections for Trent. Kotak Institutional Equities sharply reduced their FY26-28 earnings-per-share estimates by 7-14%, citing expectations of lower revenues and higher costs.
Jefferies India maintained their 'Hold' rating on the stock with a lowered price target of ₹5,000, expressing uncertainty about whether the worst is over for the company. Trent shares have corrected significantly in the past six months, down 42% from 52-week highs of ₹7,493.05 seen on January 3.
For the Trent stock to regain investor confidence and experience a re-rating, market experts emphasize that investors will need concrete proof of improving growth rates. Store additions and the progress of newer formats remain key variables that analysts will closely monitor in the coming quarters.
As Trent continues its expansion while managing cost pressures, the company believes that medium-term demand traction will support small-ticket discretionary lifestyle categories. However, the path to sustained growth recovery remains uncertain amid ongoing challenges in consumer demand and competitive pressures.
