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Trent Limited Analysis!

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#investing #stocks

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About -

Trent Ltd is a part of Tata Group & has been an early entrant in India’s organized Retail sector. Trent primarly operates stores through 5 formats.

It functions through Westside, Zudio, Zara JV, Star Bazaar JV & Landmark Stores.

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• Sector Backdrop-

India is well poised for a strong retail sector growth owing to these factors-

1) Young population
2) Rising urbanisation
3) Rising disposable income
4) Faster internet penetration
5) Rising fashion awareness
6) Growing influence of social media

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Let’s dive into Trent’s main business, Westside-

1) Aspirational fashion

2) 100% Exclusive brand portfolio

3) Digitally enabled supply chain

4) Synchronised proposition in store and online

5) 197 Retail stores

6) 5% of westside’s revenue coming from its website

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• Westside reported a revenue of over ₹10b, resulting in a growth of 88.6% YoY. Compared to pre-COVID levels, revenue grew ~34%.

• It contributes ~75% of the total revenue of Trent.

• The focus is on adding more stores while keeping the operating cost under check.

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Zudio-

1) Fashion at stunning prices

2) 100% exclusive brand portfolio

3) 177 stores across 57 cities

4) Accelerated expansion

5) Strong supply chai

6) Sustainable business model

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• Zudio’s strong value format proposition have led to industry leading performance much ahead of its peers. The latter is barely achieving preCOVID revenue levels.

• Revenue for Zudio stood ~₹3.3b, up 94.4% YoY. As compared to pre-COVID levels, revenue rose 3.7x.

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Strong Growth-

• Trent is witnessing strong growth across businesses aided by rapid vaccinations, further relaxation of pandemic-related restrictions & strong execution.

• It is getting robust traction in the online channel with over 5% of revenues coming from it.

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How is Trent keeping rising cost in check?

1)Efficiencies at store level

2) Stringent cost control

3) Negotiation with landlords is helping operational cost to remain under control.

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Key risks-

1) Ever increasing debt level of the company

2) Company is not able to generate free cash

3) Valuations are very high.

4) Sub optimal economics for Zudio’s new stores

5) Competition from other
e-commerce giants

6) Rising inflation

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Conclusion:

Trent is the only branded retail player with close to 100% share of private brands with pan-India presence. It offers a strong set of brands catering to all categories of consumers. Trent reported highest avg revenue per sqft compared to other big players.

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• Aggressive store expansion, higher contribution from private brands, & innovative product offering in the premium and value fashion space would be key growth drivers for the company going ahead. However, companies leverage ratios makes it look vulnerable.

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What do you think about Trent’s expensive valuation vs it’s future growth projections?

@caniravkaria @AvadhMaheshwar2 @SIP_INVEST0R @WealthEnrich

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