International brokerage Morgan Stanley maintained its 'overweight' call on Tata Group subsidiary Trent, after reports suggested it launched a new standalone store format, Zudio Beauty, marking its entry into the mass-priced beauty segment.
The move positions Zudio Beauty in direct competition with established players such as Hindustan Unilever's Elle18, Sugar Cosmetics, Health & Glow and Colorbar.
Morgan Stanley has a target price of Rs 8,032 per share on Trent, implying an upside of eight percent from the previous session's closing price.
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The brokerage said that the BPC sales contribution was already quite material in Westside and Zudio stores. Zudio's BPC business had built scale over time, as customers have become more indulgent and impulsive.
The salience of emerging categories has increased to 20 percent of total revenues, as compared to 10 percent earlier.
Trent is no stranger to the beauty industry, having earlier ventured into the high-end cosmetics space with Tata Cliq Palette stores. Tata also founded India’s first beauty brand, Lakme, which was later sold to Hindustan Unilever.
According to industry executives, the expansion taps into the affordable beauty space as most competitors, including Reliance, Nykaa, and Shoppers Stop, focus on premium and luxury categories.
Trent's first Zudio Beauty store has already opened in Bengaluru, with plans to expand to major cities such as Gurugram, Pune and Hyderabad.
Zudio, which started in FY17 as part of Star stores, has become one of the largest apparel brands in India, significantly contributing to Trent’s growth. Its rapid success is attributed to a unique design portfolio and low gross margin, which has led to high store productivity.
In FY24, Zudio surpassed Westside in revenue, now contributing over a third of Trent’s total revenue, up from just 8 percent a few years ago. Trent operates 559 Zudio stores and 228 Westside stores as of June.
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