What is the secret behind Zudio's growth? Ace fund manager Saurabh Mukherjea explains

Fund manager Saurav Mukherjea

Tata group’s budget-friendly retail apparel chain Zudio has been on an exponential growth trajectory in the last few years. In March, the brand opened its 506th store in East Delhi, leased a 22,000 square feet retail space in Gurugram, and according to domestic brokerage Motilal Oswal Financial Services, the fourth quarter results for FY24 are likely to be an outlier in a sector which is expected to witness a muted demand.

So, what is the secret behind this phenomenal rise?

Fund manager Saurabh Mukherjea believes it’s the brand’s ability to refresh its inventory every few days that has helped it establish its presence in the market. Last year, Marcellus Investment Managers said that it had added apparel retailer Tata Trent, which owns and operates Zudio, to its Consistent Compounders Portfolio.

Marcellus had reasoned that the competitive advantages of Trent lie in its end-to-end control of supply chain and product development – which translates into greater value-for-money proposition for customers, relevant of the merchandise and hence inventory turns (6x) which are the best in the industry.

“Once these strengths were developed for Westside, formats like Zudio have subsequently been built on the same tenets through usage of common vendors, warehousing, and logistics at the back end and common store opening teams at the front-end,” said the fund management team at Marcellus.

“Zudio refreshes its inventory every 15 days. No other apparel firm in the industry turns its inventory as fast. Our estimate is that they are 3-5 times historically faster than its competitors,” said Mukherjea recently on a YouTube channel called Sensei Kujaku, which discusses business, investment and entrepreneurship.

He said that they have taken a leaf out of Asian Paints' strategic book and implemented it in the apparel industry.

“What we have witnessed is that their turns are radically faster… and to build a back-end that quickly develops new clothes, designs and according to the tastes of different cities, it takes an enormous analytical effort and it will be difficult for anyone to replicate that,” the fund manager said.

In an interview with the Economic Times last year, Mukherjea had said that Trent can deliver 2000x returns in the next 20 years that Titan was able to do in the previous 20 years.

The shares of Trent, under which the brand is housed, ended April 8 at Rs 3,926, declining marginally by 0.31 percent. The price has zoomed almost 190 percent in the past one year, with a 52-week high of Rs 4,243.65 and a  52-week low of Rs 1,307.05.