Trent's Q3 earnings fails to impress despite leading industry, brokerages slash targets

Trent shares fell 8 percent in trade in the previous session, which Bernstein touted as an 'overreaction'.

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Zudio and Westside operator Trent Ltd.'s earnings show for the quarter ended December 31, 2024, failed to impress brokerages as revenue slipped under estimates.

Trent reported a net profit of Rs 496.54 crore, higher by 34 percent from the Rs 370.64 crore net profit reported in Q3 of previous financial year. Its revenue from operations also jumped 34 percent on-year to Rs 4,656.56 crore.

However, even though Trent's revenue growth slipped and continues to moderate as a result of store consolidation and weak consumer demand, Trent's Q3FY25 growth remains industry-leading and healthy.

Trent's gross margin compressed 124 basis points on-year to 44.7 percent, which was entirely mix led, as it did not have any EOSS during Q3FY25. However, the company maintains that gross margins in both Westside and Zudio is stable.

In the previous session, investors sold off Trent's stock in droves, sending the share price tumbling over eight percent intraday. Global brokerage Bernstein said the fall in Trent's stock was an over-reaction from the markets.

In today's session, traders bought back into the stock, as Trent shares were up 1.8 percent at Rs 5,368.35 at 9.35 am.

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Trent opened 82 stores and closed 6 stores in the fashion concepts to take the total store count to 907. While Trent's 76 new Westside/Zudio stores in Q3 are a positive sign, upgrades and consolidations in upcoming quarters may limit overall net store growth, noted Nuvama Institutional Equities.

Nuvama said, "Accounting for softness in growth momentum, we are tweaking PAT estimates by
13.3 percent for FY26." The brokerage trimmed its price target to Rs 6,662, down from Rs 7,475 earlier."

Motilal Oswal also trimmed its target price to Rs 7,350, while reiterating its buy rating.

While international brokerages Bernstein and Citi Research kept their bullish 'outperform' and 'buy' calls on Trent shares intact, the target price on the player was trimmed. Bernstein pared its fair value assumption on Trent's stock to Rs 6,900 apiece, down from Rs 8,100 earlier.

Citi cut its target on Trent's stock to Rs 7,800, from Rs 9,350. The brokerage noted that Trent was overvalued compared to peers, with the stock commanding a PE ratio of at 42x FY27E EV/EBITDA compared to Titan and DMart which trade at 36x FY27E EV/EBITDA.

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