Trent Ltd., the value retail arm of the Tata Group, has reported its Q4FY25 financial results, which show a mixed performance. While the company delivered a 28% year-on-year revenue growth, this marks its slowest top-line expansion since FY21, raising concerns among analysts about the sustainability of growth momentum. Shares of Trent will likely remain in focus on Wednesday, April 30, as investors digest the broader implications of this moderation.

Revenue Growth Slows to Multi-Quarter Low

Trent’s revenue from operations in the fourth quarter stood at approximately ₹4,217 crore, growing by 28% YoY. However, this growth came off a lower base, excluding a one-time gain of ₹543 crore in the year-ago period. Adjusted net profit for the quarter rose to ₹318.15 crore, up from ₹128 crore in Q4FY24, reflecting strong cost control and operational efficiency.

Still, the slowing revenue trend brings Trent in line with a broader slowdown among global and Indian apparel players, as the post-pandemic retail boom appears to be softening. This may indicate cooling discretionary demand, especially in urban and semi-urban markets.

Store Expansion Remains Aggressive

Despite slowing growth, Trent continues to aggressively expand its retail footprint:

• 40 Westside stores and 244 Zudio stores were opened in FY25.

• The company also consolidated 24 Westside and 24 Zudio stores, improving space productivity.

• As of March 31, Trent operates:

  • 248 Westside stores

  • 765 Zudio outlets

  • 30 other lifestyle stores

Management emphasized the quality over quantity strategy, noting their approach to micro-market penetration rather than merely comparable store performance.

“We are consciously increasing the density of our presence in key markets… and driving revenue across comparative micro-markets,” the company said in its BSE filing.

Margins Hold Steady Despite LFL Slowdown

In Q4FY25, Trent’s EBIT margin improved by 100 basis points even as like-for-like (LFL) growth slipped to mid-single digits, down from high-single digits in Q3FY25. This implies that the operating leverage benefit was limited, potentially due to the increased cost of opening new stores or declining footfall in existing ones.

However, the positive EBITDA margin beat surprised analysts, suggesting that the company’s core operations remain resilient amid competitive pressures and weak demand cycles.

Brokerage Views: Mixed Sentiment But Long-Term Bullish

Nuvama Institutional Equities:

• Trimmed target from ₹6,662 to ₹6,224, citing weakening LFL growth and store cannibalisation.

• Highlighted concerns with Zudio’s Star portfolio, which showed slowing LFL trends.

• Maintained ‘Buy’ rating, suggesting long-term confidence in Trent’s strategic execution.

Morgan Stanley:

• Retained ‘Overweight’ rating, with a revised price target of ₹6,359.

• Acknowledged gross margin compression likely due to inventory write-offs, but praised EBITDA strength.

• Termed Q4 as a “mixed bag” with hits and misses, but showed confidence in longer-term potential.

Jefferies:

• Raised its price target to ₹5,900, maintaining a ‘Hold’ call.

• Noted that moderation in like-for-like sales growth may worry short-term investors.

• Forecasts 35% standalone sales CAGR over FY25–FY28, indicating long-term optimism.

Challenges Ahead: Cannibalisation, Competition & Demand Headwinds

While Trent’s business model remains well-diversified and agile, analysts warn of certain headwinds:

• Cannibalisation risk in key micro-markets due to rapid store additions.

• Increased competition in the fast fashion and value retail space.

• Demand moderation as post-COVID pent-up spending fades.

• Inventory adjustments and margin pressures in a slowing environment.

Despite these, Trent’s balance sheet strength, Tata brand trust, and scalable Zudio format provide a solid foundation for growth.

Investor Takeaway: Hold or Accumulate on Dips

With a moderate performance in Q4FY25 but strong strategic visibility for the coming years, Trent Ltd. remains a top retail play in India's consumption story. Investors should:

• Watch store productivity and LFL growth trends over the next few quarters.

• Track management’s ability to optimize new store performance and reduce cannibalisation.

• Consider holding existing positions or accumulating on corrections, especially if price falls closer to the ₹5,500–₹5,600 range.

The stock is backed by strong institutional confidence, with all brokerages maintaining either buy or hold recommendations despite trimming price targets.

Conclusion:

While Trent Ltd. has hit a soft patch in revenue growth, its fundamentals remain intact. The Q4FY25 earnings underline both expansion potential and market saturation risks, but the company’s operational discipline and strategic focus keep it well-positioned for sustainable growth.

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